Wall Street Ends Sharply Higher After FOMC Minutes

U.S. equity markets were higher on Wednesday thanks to a rally in Apple shares, and as investors parsed the latest minutes from the Federal Reserve’s October meeting.

As of 2:45 p.m. ET, the Dow Jones Industrial Average was up 177 points, or 1% to 17636. The S&P 500 gained 22 points, or 1.10% to 2072, while the Nasdaq Composite rose 65 points, or 1.29% to 5050.

Health care and financials led the way up.

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Minutes from the  U.S. central bank’s Federal Open Market Committee meeting in October showed members emphasized that while no decision on when to raise interest rates has been finalized, December could be the month when policy normalization would be warranted depending heavily on the economic data.

Bryce Doty, senior vice president and senior fixed income manager at Sit Investment Associates, said October was the month the Fed got its courage back.

“Last minutes, there was a lot of discussion on China and the economic volatility. They were fearful. This time they seemed to have more courage and they’re ready to lead financial markets rather than react,” he said.

Doty continued that while the FOMC typically talks about seeing low inflation levels, this time, there was discussion about core PCE, which is the measure the central banks monitors closely, was closer to the Fed’s 2% objective.

“That was unusual. It’s good to see that they had a more balanced view of the decline in commodities and how lower gas prices helped consumer spending,” Doty said. “From here on out, the discussion changes from ‘if the Fed will rase,’ to ‘how.’ The path is all that matters at this point.”

Meanwhile, the central bankers spent a substantial amount of time dissecting the health of the labor market after the disappointing September non-farm payrolls report. While October figures were substantially higher than expected, Doty said it makes November’s jobs report even more important.

“It’s critical,” he said. “The October report did satisfy a lot of the issues they brought up in the minutes. But the next jobs report could throw a rate rise back into doubt, though I think it will be strong enough they won’t be deterred from December.”

Meanwhile, Goldman Sachs (NYSE:GS) said in a note to clients that investors should think of Apple more as a services company than a technology giant. The investment bank also added the company to its “conviction buy list” and said it expects shares to rally more than 40% over the next 12 months. Apple shares were the biggest gainer on the Dow, rising more than 3%.

The energy sector saw a big rally early in the trading session, but reversed course in afternoon action. Inventory data from the American Petroleum Institute showed U.S. stockpiles fell by 482,000 barrels, while EIA data showed a smaller-than-expected gain in inventories last week.

Dallas Fed President Rob Kaplan, in a speech, said global oil supply and demand might not reach a balance until the early part of 2017, citing data from the Department of Energy. After bouncing between significant gains and losses, U.S. crude settled up 0.20% to $40.75 a barrel, after briefly dipping below $40 for the first time since August. Meanwhile Brent, the international benchmark, gained 1.13% to $44.14 a barrel.

Elsewhere in commodities, metals were lower as gold traded along the flat line, declining 0.07% to $1,067 a troy ounce. Silver shed 0.89% to $14.04 an ounce, while copper declined 1.37% to $2.08 a pound.

Meanwhile, investors anxiously anticipated the release of the Federal Reserve’s latest meeting minutes at 2:00 p.m. The central bank opted to keep rates steady at its October meeting, as policymakers agreed to continue monitoring every piece of economic data in the U.S. for signs of higher inflation and full employment.

Data have shown that in the last month, wholesale level inflation dropped more than expected, even when stripping out the volatile food and energy components, while consumer price inflation also saw a slight pickup. Core PCE, or personal consumption expenditures excluding food and energy prices – the Fed’s primary inflation gauge – was hovering at 1.28% in September.

“The importance of…the FOMC meeting minutes has not been lost on traders as a willingness to sit on their hands rather than risk exposure has triggered a quieter than normal morning session,” Alastair McCaig, IG market analyst, wrote in a note.

The Fed is widely expected to hike interest rates at its December meeting, and Wednesday’s minutes are likely to show just how close central bankers are to making that decision.

In recent action, the yield on the benchmark 10-year U.S. Treasury bond rose 0.015 percentage point to 2.276%.

On the economic-data front, traders parsed the latest housing data from the Commerce Department. Starts of new home construction unexpectedly dropped 11% in October to an annualized rate of 1.06 million units, well below expectations for a 6.5% gain. Permits to build new homes, meanwhile, rose 4.1% to an annualized rate of 1.5 million units, matching expectations.

Global markets were mostly lower. Asia markets ended mixed, while their European counterparts were mostly lower. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, declined 0.58% while the German Dax shed 0.10%, the French CAC 40 shed 0.62%, and the UK’s FTSE 100 traded up 0.16%.