Stock Market Forecast – Stocks Edge Higher Following Dovish Fed Meeting Minutes

US stocks moved higher on Wednesday rising following the release of dovish Federal Reserve minutes. Sectors were mixed, with the S&P 500 led higher by the materials sector. This is the second consecutive trading session where materials moved higher led by chemicals and gold miners. Real-estate and communication services were the worst performing sectors. Since the Federal Reserve last met in January stocks have moved higher as a Fed put seems to be in place. The S&P 500 has rallied more than 10% since hitting its lows in late December, which has increased sentiment too an overbought reading.

Small Caps and Technology Lead Market Rebound

Small cap stocks have led the markets higher, which is generally a positive sign. In the last 60-days since the market bottomed, technology shares have been the best performing sector rising 12.2%, followed by Industrials and Healthcare which have both increased slightly more than 7%.

The FOMC Meeting Minutes Headline Wednesday’s News

The focus on Wednesday was the Federal Reserve meeting minutes. The last Fed meeting has been labeled the pivot, where the Fed determined that the US economy was contracting slightly and the Fed did not need to hike rates again soon following the December hike which took rates up to 2.25-2.50%.

Most Federal Reserve officials in January expected the central bank could stop shrinking its $4 trillion asset portfolio later this year and believed a plan to do so should be released soon. The markets see this as the end of quantitative tightening, which might put a floor under stock prices.

Officials also agreed to signal a pause in interest-rate increases until they could better judge the outcome of rising risks to US economic growth. Last week the Commerce Department report a huge contraction in retail sales, which was followed by a worse than expected decline in industrial output.

The written account of the FOMC meeting showed a split over whether officials believed any interest-rate increases would be necessary this year because of diverging views over the economy’s likely trajectory. The markets are currently pricing in no change to rates in 2019.

Patience is a Key Term for the Fed

A key term that continues to buoy the markets is the use of the word “patient” to describe their current stance of putting rate increases on hold. According to the FOMC minutes, some form of the word appeared 14 times in Wednesday’s minutes. Officials didn’t see significant risks to signaling they would move to the sidelines after raising rates in quarterly intervals last year.

Traders Will be Focusing on Energy Shares on Thursday

Trader’s will be focusing on energy shares on Thursday as the EIA will be releasing its inventory report for both oil and natural gas.  Energy shares have rebounded significantly over the past week, as crude oil prices surged.