US close: Stocks finish firmly lower after FOMC minutes

dl wall street wall st new york city nyc ney york stock exchange nyse nasdaq dow jones industrial average djia trading us usa united states of america 2023120702241 — Sharecast graphic / Josh White

US stocks dropped sharply on Wednesday with the Dow falling nearly 300 points after minutes from the latest Federal Reserve policy meeting failed to give conclusive evidence of when the central bank might start to cut interest rates.

The Federal Open Market Committee (FOMC) discussed at its 12-13 December meeting that members' inflation outlooks mean interest-rate cuts would likely "be appropriate by the end of 2024". But the path was "associated with an unusually elevated degree of uncertainty" and that rate hikes could be on the cards if things take a turn for the worse.

Nevertheless, minutes showed that policymakers talked about the "diminished" upside risks to inflation, while some participants were worried about how long the current restrictive monetary policy should continue given the "downside risks to the economy" from elevated interest rates.

The Dow finished 285 points lower at 37,430.19 (-0.8%), pulling back from another record high, while the S&P 500 declined 0.8% and the Nasdaq dropped 1.2%.

Adding to the uncertain outlook was Richmond Fed president Tom Barkin, who on Wednesday hinted that the US economy was probably heading for a soft landing but indicated that geopolitical tensions meant a cautious approach was still needed by policymakers. Barkin said interest rate hikes remain "on the table" even though officials at their most recent meeting in December indicated that this round of policy tightening was probably over as inflation continued to fall.

Economic data comes in mixed

On the macro front, the manufacturing downturn in the US eased a little more than expected in December, according to the Institute for Supply Management's purchasing managers' index, which increased to 47.4 from 46.7 in November. While this was the 14th straight month in negative territory – indicated by any reading below 50 – economists had expected a smaller increase to 47.1.

US job openings decreased by 62,000 in November, hitting their lowest level in almost two years, according to the Bureau of Labor Statistics. November's job openings and labour turnover statistics survey came in at 8.79m, below consensus estimates for a reading of 8.85m.

On another note, US mortgage applications sank by 10.7% in the week ended 29 December, according to the Mortgage Bankers Association, the fastest weekly decline seen since February and despite lower Treasury yields and mortgage rates. Applications to refinance a mortgage crashed 18.1%, following a 0.1% drop a month earlier, while applications to purchase a new home slipped 7.6% to fully erase the 2.4% increase seen a week earlier.

Xerox tanks

Shares in Xerox Holdings dropped 12% after the American digital printing and office solutions group unveiled a "reinvention and operating model evolution" which will see it cut 15% of its workforce. The new plan, which will be actioned in the current quarter, will affect an estimated 3,450 workers of the total 23,000 employed according to its latest annual report.

Charles Schwab was another notable faller after the broker was hit by a downgrade by Goldman Sachs from 'buy' to 'neutral', while pharma group Eli Lilly was lifted by Bank of America analysts who named the stock a top biopharma pick.

Meanwhile, Apple was declining for the second straight day after Barclays lowered its rating on the stock citing an underwhelming sales season for the iPhone 15.

Dow Jones - Risers

Chevron Corp. (CVX) $152.33 1.91%
Merck & Co. Inc. (MRK) $114.72 1.35%
Amgen Inc. (AMGN) $300.69 1.11%
Walt Disney Co. (DIS) $91.65 1.04%
Verizon Communications Inc. (VZ) $39.17 0.72%
Johnson & Johnson (JNJ) $160.98 0.63%
Unitedhealth Group Inc. (UNH) $542.03 0.50%
Coca-Cola Co. (KO) $59.99 0.23%
Walmart Inc. (WMT) $159.35 0.01%
Cisco Systems Inc. (CSCO) $50.51 0.00%