US stocks climb as traders await Fed policy clues

US stocks rose as investors await the release of policy minutes from the Federal Reserve’s latest meeting for potential signs that the pace of rate hikes may slow.

The S&P 500 climbed after closing at its highest level since mid-September on Tuesday. The Nasdaq 100 jumped after wavering as the session started.

Market trading volumes are expected to be lighter, given the US Thanksgiving holiday on Thursday.

A gauge of dollar strength dipped after data Wednesday showed that US unemployment applications rose more than expected to a three-month high, in a sign of cooling in the labour market. Treasuries rallied after weaker-than-expected purchasing managers’ index readings for November.

Another batch of data on Wednesday indicated that capital spending plans are holding up in the face of higher borrowing costs and broader economic uncertainty. Oil fell as the EU discussed imposing a price cap on Russian oil between $65 and $70 a barrel.

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The publication of minutes from the Fed’s 1-2 November – due at 14:00 in Washington – will be studied for how united policy makers were over a higher peak for interest rates than previously signaled in their inflation fight. However, since that meeting, investors have grappled with economic data which has slightly eased inflation concerns.

Some investors anticipate that lower-than-estimated inflation figures could prompt the Fed to temper the size of its rate hikes as early as at next month’s gathering.

“Investors may be on the hunt for clues that they’ve acted prematurely, or that there’s actually more support for such a slowdown in tightening and less for a higher terminal rate than they previously thought,” said Craig Erlam, senior market analyst at Oanda Europe Ltd.

European investors digested data showing that private-sector activity in Germany and France – the euro area’s top two economies – contracted in November, painting a bleak picture for a region that may already be in recession.

A separate survey showed that the UK economy is in recession, with the downturn expected to worsen into 2023.

Meanwhile, a gauge measuring Euro-area activity in manufacturing and services unexpectedly rose in November, signaling that businesses see tentative signs that the region’s economic slump may be easing as record inflation cools and expectations for future production improve.

© 2022 Bloomberg

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