Stocks Turn Red After Fed Points Out Various Risks to Economic Growth

The market’s initial reaction to the release of the Fed’s January Monetary Policy Minutes was mixed with stocks hitting their high for the session, and the U.S. Dollar weakening against a basket of currencies despite higher Treasury yields. Surprisingly, dollar-denominated gold retreated from its 10-month high hit earlier in the session. The information is being released in pieces, adding to the volatility.

At 19:00 GMT, March E-mini Dow Jones Industrial Average futures were trading 25891, up 8 points or +0.01%. After hitting a new high for the session, the market is getting close to turning negative for the day. March 10-year U.S. Treasury note futures are trading lower, signaling a rise in interest rates. The March U.S. Dollar Index is trading 96.150, down 0.199 or -0.21% and April Comex gold is at $1341.30, down $3.50 or -0.27%.

Federal Reserve Notes Increasing Risks to Economy

According to the Fed minutes released on Wednesday at 19:00 GMT, policymakers judged that a “patient” approach to interest rate hikes would be prudent as they continued to weigh various headwinds to economic growth.

“Participants pointed to a variety of considerations that supported a patient approach to monetary policy at this juncture as an appropriate step in managing various risks and uncertainties in the outlook,” the meeting said.

Some of the Fed’s concerns included the recent softness in inflation, the government shutdown and the path of fiscal policy. The minutes showed that officials also weighed the impact that Fed policy tightening moves as well as the ongoing trade negotiations between the U.S. and China would have on the economy.

Members also added that keeping the federal funds rate in the target range of 2.25 percent to 2.50 percent “posed few risks at this point.”

Finally, Federal Open Market Committee members noted that if the potential headwinds eased, a reevaluation of the “patient” approach would be warranted.

Look for Heightened Volatility

One more thing of note, due to the onset of inclement weather, the Fed did not hold its usual lock-up for media members ahead of the release. As a result, traders should look for volatile, two-sided trading since other key parts of the minutes are expected to be released on a rolling basis.