Wall Street Rallies After Fed Minutes

U.S. equities rallied into the closing bell on Thursday as traders digested the FOMC’s meeting minutes and awaited the unofficial kickoff to earnings season after the close of trade.

The Dow Jones Industrial Average rose 138 points, or 0.82% to 17050. The S&P 500 gained 17 points, or 0.88% to 2013, while the Nasdaq Composite added 19 points, or 0.41% to 4810.

Energy was the biggest gainer on the session, climbing nearly 2%. All 10 S&P sectors ended the day in positive territory. The Dow touched 17,000 for the first time since Aug. 20.

Today’s Markets

Focus on Wall Street returned to the Federal Reserve as the central bank’s policy-setting Federal Open Market Committee released its September meeting minutes at 2 p.m. While the markets have traded on and digested the decision from members not to hike short-term interest rates from historic lows, they’re anxious to see how the decision was made, and what debate centered on during the two-day gathering.

“It is honestly a bit confusing since nearly all the speeches given in the post-FOMC period have seemed to contradict the FOMC focus on geopolitical threats to our recovery,” Peter Kenny, market analyst, wrote in a note. “I would go so far as to say that even those considered dovish on the FOMC have seemed rather intent on walking back the tone established in the last FOMC statement.”

According to the minutes, FOMC members believed raising interest rates too early would add to pressures keeping inflation below the Fed’s target rate. Central bankers also think only a gradual rate hike is appropriate amid weak economic activity abroad.

The minutes come exactly three weeks after the statement. Because of that, Deutsche Bank economists said the minutes are “stale” since a lot has changed in that time. They specifically noted a downshift in the employment-growth trend after last week’s September jobs report which showed far fewer jobs were created during the month than had been anticipated.

Additionally, the investment bank economists see second-half GDP growth dimming thanks to a decline in U.S. net exports, and when looking to the Fed Funds futures market – expectations for a rate hike before the end of the year have continued to come down.

“This matters because the Fed has not gone against the market. When the Fed does not raise rates at the October 27-28 FOMC meeting, the markets will assign a much greater probability to a delay into 2016 unless the meeting statement is hawkish,” the note said. “But hawkishness is highly unlikely given the aforementioned slowdown in employment and what is projected for second-half 2015 real GDP.”

But not everyone was waiting with baited breath for the minutes’ release. Tony Roth, Wilmington Trust CIO, said they’re less important than they look on paper.

“The Fed is less relevant today because it has less impact and power on the economy. It’s in such an accommodative position that even if it was to move in a minor way – 25 basis points or 50 baisis points – it’s not going to have a dramatic impact on GDP. It’s done such a poor job of providing clarity to the markets…paying attention to the Fed is a fool’s errand,” he said.

It wasn’t just the Fed minutes Wall Street was bracing for: Another round of Fed speak was expected to bookend the release. At 1 p.m., Minneapolis Fed President Narayana Kocherlakota was set to speak at a forum, and San Francisco Fed President John Williams was expected to give his economic outlook at 3:30 p.m.

In recent action, the yield on the benchmark 10-year U.S. Treasury bond rose 0.046 percentage point to 2.11%.

As the Fed remains data dependent before making a decision on when to hike rates, so does Wall Street. Traders parsed the latest weekly jobless claims, the only data point on the U.S. economic calendar on Thursday. The number of Americans filing for first-time unemployment benefits fell last week to 263,000 from a downwardly revised 276,000 the week prior. Wall Street expected claims to fall to 274,000.

Elsewhere, after a seesaw couple of sessions for the oil market thanks to supply expectations and the latest inventory data from the EIA, crude prices were steadily higher on Thursday. U.S. crude rose 3.4% to $49.43 a barrel. Brent, the international benchmark, popped 3.3% to $53.45 a barrel.

Metals rebounded along with stocks as gold rose 0.1% to $1,149 a troy ounce and silver fell about 2% to $15.77 an ounce. Copper, meanwhile, declined 0.7% to $2.34 a pound.

Traders also eyed the unofficial kickoff to third-quarter earnings season, which came after the closing bell. Aluminum giant Alcoa (NYSE:AA) reported per-share earnings of 7 cents, short of Wall Street’s consensus estimate of 14 cents. Revenue also missed expectations. Alcoa shares were trading 4% lower after hours.

Overseas, European markets were mixed. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, was 0.1% higher. The German Dax rose 0.23%, while the French CAC 40 rose 0.18%, and the UK’s FTSE 100 rose 0.61%.