U.S. stock markets closed mixed on Wednesday following the release of the Fed’s February FOMC meeting minutes. Market participants digested the report in order to find out any clue regarding future interest rate movement. The Dow and the S&P 500 ended in negative territory while the Nasdaq Composite finished in green.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) dropped 0.3% to close at 33,045.09. Notably, 18 components of the 30-stock index ended in negative territory and 12 in positive zone.

The major loser of the blue-chip index was Intel Corp. (INTC Quick QuoteINTC - Free Report) , shares of which slid 2.3%. Intel currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The tech-heavy Nasdaq Composite finished at 11,507.07 rising 0.1% due to good performance of large-cap technology stocks. The S&P 500 fell  0.2% to end at 3,991.05. Eight out of 11 broad sectors of the benchmark index closed in negative territory while three in positive zone. The Real Estate Select Sector SPDR (XLRE) rose 0.9% while the Materials Select Sector SPDR (XLB) fell 0.8%.

The fear-gauge CBOE Volatility Index (VIX) was down 2.5% to 22.29. A total of 10.58 billion shares were traded on Wednesday, lower than the last 20-session average of 11.61 billion. The S&P 500 posted four new highs and one new low while the Nasdaq Composite recorded 36 new highs and 110 new lows.

Fed Reiterates Commitment to Fight Inflation

The February FOMC meeting minutes revealed that Fed officials remained unanimous to continue to fight inflation. The Consumer Price index (CPI) – a key measure of inflation – came in at 6.4% in January 2023. Although, the metric fell significantly to its peak of 9.1% in June 2022, it remains well above the central bank’s target rate of 2%.

However, most of the Fed officials were in favor of hiking the benchmark interest rate by a lesser 25 basis points in February. Only a few members opted for 50 basis points rate hike. The fed Fund rate is currently within the range of 4.5% to 4.75%.

The minutes said “Participants noted that inflation data received over the past three months showed a welcome reduction in the monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path.”

Higher Rate Regime Likely to Extend

The fears of higher interest rate hikes were fueled following comments from St. Louis Federal Reserve President James Bullard. Last week, he said that he had proposed a 50-basis point rate hike in the Fed’s last meeting and such a hike could be expected in the March meeting. Bullard’s sentiments were echoed by Cleveland Fed President Loretta Mester, saying that she also supports a steeper rate hike in the next meeting, which further weighed on stocks.

On Feb 17, Federal Reserve Governor Michelle Bowman said “I think there’s a long way to go before we reach our 2% inflation objective and I think we’ll have to continue to raise the federal funds rate until we see a lot more progress on that.”

On Feb 22, in an interview with CNBC, Bullard said that going higher sooner would be more effective. Per Bullard, the terminal interest rate should be around 5.375% instead of 5.1% expected by the Fed earlier.

On Feb 22, the yield on the benchmark 10-Year U.S. Treasury Note closed at 3.92%. The yield on the short-term 2 Year U.S. Treasury Note closed at 4.693%. The shape of the yield curve between 2-Year and 10-Year Notes remained inverted for last three months. A section of economists and financial experts are considering this trend as a signal for a possible near-term recession.