Stocks rise after Fed minutes; inflation data, earnings in focus

Stocks rose on Wall Street on Wednesday, with the S&P 500 and Dow hitting record closing highs ahead of the release of Fed minutes, September inflation data and the start of earnings season.

Market heavyweight Alphabet (NASDAQ:GOOGL) pared losses to close 1.5% lower after the U.S. Justice Department said it may ask a judge to force Google to divest some of its businesses. Those businesses include the Chrome web browser and Android operating system to weaken its search monopoly.

The Federal Reserve's September minutes showed that a "vast majority" of officials supported a sharp half-percentage-point rate cut. However, there was broad agreement that the move would not require the Fed to adopt any particular pace of rate cuts going forward.

Traders recently gave about a 79% chance of a 25 basis-point cut in borrowing costs and a 21% chance that the Fed would keep rates unchanged, according to the CME's FedWatch.

"The minutes confirmed what we thought all along and investors breathed a sigh of relief," said Lindsey Bell, chief strategist at 248 Ventures in Charlotte, North Carolina. "There was a debate about a 50 basis point cut, which means we don't have a consensus that we need to cut by a big 50 basis point."

The market is awaiting the Consumer Price Index inflation report on Thursday morning and the third-quarter corporate earnings season, which kicks off in earnest on Friday with the release of earnings from some of the largest U.S. banks.

"The minutes also further confirmed that the Fed believes they have won the inflation battle. So tomorrow's CPI data shouldn't be too surprising," Bell said.

Trading was volatile this week as investors adjusted their expectations for rate cuts after an unexpectedly strong September jobs report suggested the U.S. economy was in better shape than investors feared.

"There has been a lot of optimism in the market since the jobs report on Friday. Investors remain optimistic about a soft landing or no landing scenario," she said. The economy could even avoid a mild recession.

The Dow Jones Industrial Average rose 431.63 points, or 1.03%, to 42,512.00. The S&P 500 rose 40.91 points, or 0.71%, to 5,792.04, and the Nasdaq Composite rose 108.70 points, or 0.60%, to 18,291.62.

It was the first time the S&P hit a record closing high in October, but it was the 44th time it has done so in 2024. The Dow last hit a record closing high on Oct. 4.

Of the 11 industry sectors in the S&P 500, nine rose, while the rate-sensitive utilities index fell 0.9% and the communications services index, which includes Alphabet, fell 0.6%.

“The news of the antitrust move raises concerns about what this means for the tech sector, especially for the most dominant players,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management (OTC:BNPQY).

Investors are also watching for any damage that could come from Category 5 Hurricane Milton. The expanding hurricane is bearing down on Florida’s west coast, spawning tornadoes and pounding the region with heavy rain and strong winds hours before its expected landfall near Tampa Bay on Wednesday evening, when it could bring deadly saltwater to communities already battered by Hurricane Helene.

Among notable stocks, Boeing (NYSE:BA) shares closed down 3.4% after talks between the aerospace company and its main manufacturing union collapsed.

Among gainers, Norwegian Cruise Line (NYSE:NCLH) shares rose 10.9%, outperforming the broader market, after Citi upgraded it to “buy.” Peers Carnival Cruise Line (NYSE:CCL) rose 7% and Royal Caribbean Cruises (NYSE:RCL) gained 5.2%.

Arcadium Lithium surged 30.9% after Rio Tinto (NYSE:RIO) said it would buy the mining company for $6.7 billion.

U.S.-listed shares of Alibaba Group (NYSE:BABA) fell 1.6% and Pinduoduo Holdings fell 2.3% as investors questioned whether China would announce new stimulus measures.

Advancing issues outnumbered declining ones on the NYSE by a ratio of 1.31 to 1, with 339 stocks hitting new highs and 49 new lows.

Volume on U.S. exchanges was 11.09 billion shares, compared with the 12.04 billion moving average over the last 20 trading days.