S&P 500 climbs in wild trading after Fed minutes point to higher for longer rates

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Investing.com — The S&P 500 climbed Wednesday, but investors had to contend with wild swings as the Federal Reserve December meeting minutes signaled higher for longer rates ahead at a time when data showing a tight labor market stoked fears of a pick-up in inflation.

The S&P 500 rose 0.7%, the Dow Jones Industrial Average roise 0.4%, or 116 points, and the Nasdaq Composite was 0.75% higher.  

Federal Reserve policymakers agreed that a sustained period of restrictive policy would be needed to cool “unacceptably high” inflation, according to the minutes of the Fed’s December meeting released on Wednesday.

The minutes stoked fears of higher for longer rates just as data highlighted a slower-than-expected dent in labor demand.  

The U.S. Labor Department’s latest Job Openings and Labor Turnover Survey (JOLTs) report, a measure of labor demand, showed job openings in November fell less than expected to about 10.5 million, compared with expectations of 10.0 million.

The JOLTS report was “very strong,” Jefferies said in a note, warning that without a “substantial reduction in labor demand…the Fed will not be comfortable pausing, let alone cutting rates.”

U.S. Treasury yields, however, continued to trade in the red and were reluctant to price in more aggressive Federal Reserve rate hikes.

Banking stocks, however, shrugged off the fall in Treasury yields, the enemy of net interest margins, as investors looked ahead to the start of quarterly earnings season in earnest next week.

“4Q earnings should be decent for most banks, in our view, with higher rates and solid loan growth continuing to benefit net interest income in the near term, but positive momentum may start to fade,” Wedbush said in a note.

Citigroup Inc (NYSE:C), SVB Financial Group (NASDAQ:SIVB), Zions Bancorporation (NASDAQ:ZION) led the gainers in financials.

In consumer discretionary, Tesla Inc (NASDAQ:TSLA) climbed nearly 5% following a 12% plunge a day earlier, while Bath & Body Works Inc. (NYSE:BBWI) jumped 9% following a price upgrade to $52 from $50 from Piper Sandler.

Travel and leisure stocks were also in focus as cruise stocks rallied after Carnival said it would raise its price for U.S. and European guests starting April 1.

Carnival Corporation (NYSE:CCL) was up 9%, while Royal Caribbean Cruises Ltd (NYSE:RCL) and Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) were up more than 7% and 4% respectively.

Microsoft Corporation (NASDAQ:MSFT), meanwhile, fell about 5% after UBS downgraded the stock to neutral from buy, citing demand headwinds for the company’s office and cloud businesses.

A Micron-led surge in semiconductor stocks helped keep a lid on downside momentum in tech. 

Micron Technology (NASDAQ:MU) rallied 7% after Daiwa talked up the prospect of higher memory prices on expectations for a rebound in demand in the second half of the year.