Nasdaq bounces but Dow falls in choppy trade ahead of Fed minutes

What’s driving the markets?

Investors are concerned that economic growth will slow quickly amid tighter monetary conditions, with the war in Ukraine and China’s COVID lockdowns worsening the outlook. 

U.S. benchmark indexes have suffered this month after grim earnings outlooks from several major retailers. More reports this week could help inform how other companies are handling inflationary pressures. Snowflake
SNOW,
+0.43%
and Nvidia
NVDA,
+3.22%
are set to post quarterly reports after the bell Wednesday. Costco
COST,
-0.78%
will report on Thursday. They might also help stocks find a footing.

“I think the market has put in a bottom,” said Peter Cardillo, chief market economist at Spartan Capital Securities, by phone.

The S&P 500’s recent testing of the 3,850 level, but then finding higher ground, helped inform his rationale. Cardillo also said investors have been “through the discounting process of high inflation,” aggressive tightening of financial conditions by the Fed and the probability of a recession.

Markets may pivot on clues to future monetary policy decisions, when the Fed minutes from the latest monetary policy meeting are released at 2 p.m. Eastern Time.

While Cardillo doesn’t expect any “fireworks,” he does expect the Fed to raise rates aggressively over the next three policy meetings, but then to re-evaluate its stance.

Read: S&P 500 hovers near bear market. Its ferocity may depend on the economy.

“While the hunt for any mention of a possible 75bps rate hike may be futile, the base case stays at a series of 50bps rate hikes to follow,” said a team of strategists at Saxo Bank. “But investors are also increasingly parsing Fed talk to look for signs of stagflation or economic slowdown and that really is driving the market sentiment for now.”

Still, the minutes “are a month old and the markets have a lot of time change in the meantime, and it won’t really affect anything going forward,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

Fed Chairman Jerome Powell has laid plans for the central bank to boost the benchmark interest rate by half-a-percentage point at the next two FOMC meetings in June and July, bringing it to near 2% by August.

Read: Fed’s Bostic calls for caution as Fed raises rates: ‘Even firetrucks with sirens blaring slow down at intersections’

In economic data on Wednesday, orders at U.S. factories for long-lasting goods such as machinery and electronics rose a 0.4% in April, signaling the economy was still growing at a steady pace in the early spring. Economists polled by the Wall Street Journal had forecast a 0.7% increase.

Read: Here’s what KPMG’s U.S. chief is saying about the market downturn, the economy and M&A

Which companies are in focus?

• Shares of Dick’s Sporting Goods Inc. 
  DKS,
  +10.12%
  soared 10% Wednesday, after the sporting goods and apparel retailer reported fiscal first-quarter results that beat expectations.

• Express Inc. shares 
  EXPR,
  +8.82%
   jumped 9% Wednesday, after the clothing retailer posted a narrower-than-expected loss for the first quarter and offered guidance that was above consensus. 

• Wendy’s
  WEN,
  +9.74%
  rallied 10% after long-time shareholder Trian Fund Management said it was exploring an acquisition or other potential deal for the restaurant chain. Trian is the company’s largest shareholder, with a 19.4% stake.

• Kohl’s Corp.
  KSS,
  +15.12%
  shares gained nearly 16% on Wednesday after Reuters reported that bidders continue to circle the retailer at lower prices than earlier this year, but still well above recent trading levels of the stock.

• Nordstrom
  JWN,
  +11.27%
  surged 11.5% after the retailer raised its annual sales and profit forecast late Tuesday.

How are other assets trading?

• The yield on the 10-year Treasury note  
  TMUBMUSD10Y,
  2.758%
    edged 1 basis point lower to 2.75%, as investors sought safety in government debt. Yields and Treasury prices move opposite each other.

• The ICE Dollar Index 
  DXY,
  +0.44%,
   which measures the greenback against major currencies, was up 0.5%.

• In oil futures
  CL.1,
  +0.31%,
   West Texas Intermediate crude for July delivery 
  CLN22,
  +0.31%
   gained 0.2% to $109.98 a barrel. Gold for June delivery
  GCM22,
  -1.20%
   dropped 1.2 to $1,844 an ounce.

• Bitcoin 
  BTCUSD,
  +0.26%
   was up 0.4% at $29,430.

• In European equities, the Stoxx Europe 600 
  SXXP,
  +0.63%
    went up 0.7%, while London’s FTSE 100  
  UKX,
  +0.51%
   edged 0.5% higher.

• In Asia, the Shanghai Composite 
  SHCOMP,
  +1.19%
    finished 1.2% higher, while Hong Kong’s Hang Seng Index 
  HSI,
  +0.29%
    gained 0.3% and Japan’s Nikkei 225 index 
  NIK,
  -0.26%
   dropped 0.3%.

—-Barbara Kollmeyer contributed reporting to this article.