Dow, S&P 500, Nasdaq edge higher in choppy trading to record first gains of 2023

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Stocks recorded their first higher finish of 2023 on Wednesday, securing modest gains following a lower close in the previous session. Still, trading remained choppy amid ongoing concerns about Federal Reserve policy and the possibility of a recession this year.

The Nasdaq Composite (COMP.IND) ended +0.7%, the S&P 500 (SP500) closed +0.8% and the Dow (DJI) finished +0.4%.

Looking at closing numbers, the Nasdaq finished the session at 10,458.76, an advance of 71.78 points. Meanwhile, the Dow Jones gained 133.40 points to end at 33,269.77 and the S&P 500 climbed 28.83 points to conclude trading at 3,852.97.

All 11 S&P sectors ended the session higher. Real Estate led the way, climbing by 2.3%. Materials, Financials, Consumer Discretionary and Communication Services all advanced more than 1% as well.

“Initial optimism seemed to have revolved around a general consensus that economic conditions improving,” Daniel Jones of Avaring Capital Advisors told Seeking Alpha. “This optimism was weakened, though, because of the realization that, contrary to what some might think, the Federal Reserve intends to keep interest rates elevated (and rising) throughout 2023 for a long enough period of time to be sure that inflationary pressures ease.”

Jones added: “[Fed policy] will naturally prove to be something of a damper on the market, all else being the same, since there really is a chance of the Federal Reserve overshooting in a way that proves detrimental to the economy.” 

The minutes of the latest Fed meeting showed that policymakers remained concerned that persistent tightness in the labor market would continue to feed inflation. That discussion ended in a 50-basis-point rate hikes, which followed four consecutive increases of 75 basis points. 

Wednesday also saw additional information about the labor market. The latest JOLTS figures showed that the job openings rate held stable in November at 6.4%. Meanwhile, the quit rate ticked up to 2.7% from a reading of 2.6% in the previous report.

“This is one that Fed officials focus on, and has continued to point to an incredibly tight labor market by pre-pandemic standards,” Deutsche Bank’s Jim Reid said.

Looking to the fixed-income markets, bond yields edged lower. The 10-year Treasury yield (US10Y) dropped 10 basis points 3.70% and the 2-year yield (US2Y) declined 4 basis points to 4.36%.

Among active stocks, Salesforce (CRM) advanced after disclosing a plan to cut jobs after saying it “hired too many people” during the surge in demand that accompanied the pandemic.

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