Stocks close higher for a second day as Fed minutes signal smaller rate hikes ahead

Stocks rose Wednesday and notched the second straight day of gains as investors cheered minutes from the Federal Reserve that signaled a slower pace of interest rate hikes ahead.

The Dow Jones Industrial Average rose 95.96 points, or 0.28%, to 34,194.06. The S&P 500 gained 0.59% to close at 4,027.26 and the Nasdaq Composite increased 0.99% to 11,285.32.

Shares of Nordstrom fell 4.24% after the department store chain reaffirmed its forecast. However, Nordstrom beat profit and sales expectations in its latest results, according to consensus expectations on Refinitiv. Tesla rose 7.82% after Citi upgraded shares to neutral from sell. Deere surged 5.03% on an earnings beat.

—Carmen Reinicke

As trading, enters its final minutes, three stocks have hit all-time highs: 

• Ulta
• General Mills
• Deere

— Alex Harring

Gold and foreign exchange also responded to the Fed minutes released Wednesday afternoon.

Gold rose in response, with spot up 0.6% to $1,751.07 per ounce and futures gaining 0.7% to $1,751.80.

The U.S. dollar pulled back. The dollar index, which weighs it against a basket of foreign currency, was down 1%.

Meanwhile, the the euro added 0.9% against the dollar to $1.0399, while the pound gained 1.5% to come in at $1.2066.

— Alex Harring

Stocks jumped and bond yields slid after the minutes from the last Federal Reserve policy meeting were less hawkish than investors feared and reaffirmed the slowing of rate hikes.

"It's largely as expected. I think the Fed is saying they're going to slow the pace. It's about the terminal rate, and I generally don't think they know exactly where the terminal rate is going to lie," said Greg Faranello of AmeriVet Securities. "They'll notch up another 50 [basis points] in December and we'll see how the data goes in 2023."

A basis point equals 0.01 of a percentage point. The market expects a terminal rate, or end point for Fed rate hikes, at about 5%.

The minutes showed that a majority of Fed officials believe a slowing in the pace of rate hikes would soon be appropriate. The market has been anticipating a 50 basis point hike in December, following four hikes of 75 basis points each.

The minutes also noted that a slower pace would allow the Fed to assess whether it is making progress toward its goals of maximum employment and price stability.

"Not particularly surprising, but with several officials seeing increased risks from rapid rate hikes, the Committee is clearly acknowledging that the hiking campaign is not going to be without consequence for the real economy," wrote Ian Lyngen, head of rates strategy at BMO.

--Patti Domm

The Federal Reserve's November meeting minutes should confirm to investors that a smaller rate hike is coming next month, said Jeffrey Roach, chief economist at LPL Financial.

"Investors can reasonably assume that the Fed will hike rates by 50 basis points at the upcoming meeting," he said. "Recession looks more and more likely for the upcoming year and if the Fed responds accordingly, a recession may turn out to be short and shallow."

— Samantha Subin

Treasury yields slid after minutes from the Fed's November meeting signaled that the central bank may soon slow its tightening pace as earlier rate hikes effectively work their way through the system.

The benchmark 10-year Treasury yield was last trading at around 3.717%, or 4 basis points lower. The yield on the 2-year Treasury was down 4 basis points at 4.479%.

— Samantha Subin

Stocks rose Wednesday afternoon following the release of minutes from the Federal Reserve's November meeting. The report showed that the central bank sees progress in its fight to lower inflation and expects to slow the pace of interest rate hikes going forward.

"A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate," the minutes stated. "The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important."

That means that the Fed will likely deliver a smaller rate hike in December and in the early months of 2023.

Markets cheered the news. The Dow Jones Industrial Average rose 130 points, or 0.38%. The S&P 500 gained 0.70% and the Nasdaq Composite increased 1.10%.

—Carmen Reinicke

Stocks wavered in a day of thin volume Wednesday as Wall Street awaited the release of minutes from the last Federal Reserve meeting. The minutes will hopefully give further insight into how the central bank is thinking about future rate hikes to fight inflation.

Just ahead of the release, stocks were higher but off highs of the day. The Dow Jones Industrial Average rose 9 points, or 0.02%. The S&P 500 gained 0.23% and the Nasdaq Composite increased 0.53%.

—Carmen Reinicke

News events and analyst calls impacted how stocks were trading midday.

Citigroup — The stock dropped 2.3% after Citigroup was told it must address weaknesses in its management of financial data by U.S. banking regulators. Those regulatory groups said the issues could hinder its ability to produce correct reports during challenging times.

Manchester United — Shares of football club Manchester United surged 16%, their second straight day of double-digit gains, and touched a new 52-week high after the owners said they were exploring strategic alternatives including a potential sale.

Tesla – The electric vehicle stock popped 5.6% after Citi upgraded it to neutral from sell, citing a more balanced risk-reward outlook.

See the full list here.

— Alex Harring

It's getting harder to believe in Medtronic, Citi warned.

Analyst Joanne Wuensch downgraded the stock to neutral from buy and lowered its price target to $85 per share, which still presents an upside of about 9.1%. She said in a note to clients half what hurt the company's performance in its most recent quarter was due to broader economic conditions, while the other half was due to issues within the business.

The health technology company beat analyst expectations for per-share earnings while missing on revenue, according to its Tuesday earnings report. Company management attributed the miss on revenue to a slower recovery in procedures that utilize company products than expected, as well as challenges related to foreign exchange, supply chain, staffing and China.

The company also lowered expectations for 2023, while saying it thinks it can get expenses controlled by the second quarter. However, Wuensch said it's still getting harder to support the stock, which has lost 24.6% since the start of 2022.

"While we believe that management has a handle on the headwinds negatively impacting FY2Q23 resulting in the FY23 guide down, the timing to resolution is less certain," Wuensch said in a note to clients.

— Alex Harring

Trading volume was light Wednesday ahead of the Federal Reserve meeting minutes release, with the SPDR S&P 500 ETF Trust (SPY) trading just 22.45 million shares through 11:58 a.m. ET. By midday, the ETF trades an average of 30.08 million shares, FactSet data shows.

— Fred Imbert

Stocks pared some of their early gains heading into midday, but still remained up overall. The Dow Jones Industrial Average was up about 30 points, or 0.08%, but well off the highs of the day when it was up about 130 points.

The S&P 500 rose 0.31%, while the tech-heavy Nasdaq gained 0.66%

—Carmen Reinicke

Bullish opinion among financial newsletter editors climbed to 41.7% from 38.6% in the latest Investors Intelligence weekly poll. Optimism had slumped to a six-year low of 25% as recently as early October.

Bulls also stood above bears, down to 30.5% from 32.8%, for a second consecutive week in the most recent survey, "as former pessimists shift to longs," II said.

The current bullishness isn't "yet suggestive of tops. Our rules say above 55% bulls puts the defense back on the field. Bulls 60% and above signal increased danger the higher they get, and the need to prepare for a market decline," II's report says.

The so-called "bull-bear spread" widened to +11.2 points from +5.8 points last week, but remains below red flag territory, which doesn't start to kick in until the reading gets above +30. The spread recently topped out at +17.5 in mid-August, but was around +40-46 in the summer of 2021.

— Scott Schnipper

The University of Michigan's consumer sentiment index fell to 56.8 in November from 59.9 last month. However, that decline was smaller than a FactSet forecast that saw the index coming in at 54.7.

"Along with the ongoing impact of inflation, consumer attitudes have also been weighed down by rising borrowing costs, declining asset values, and weakening labor market expectations," Surveys of Consumers Director Joanne Hsu said in a statement.

"Buying conditions for durables, which had markedly improved last month, decreased most sharply in November, falling back 19% to its September level on the basis of high interest rates and continued high prices," Hsu added.

— Fred Imbert

The S&P 500 has a key chart point in its sights, and that may determine how it trades into yearend.

The 200-day moving average, at 4,059, is the next big hurdle for the S&P 500. The 200-day is a momentum indicator based on the average of the last 200 closing levels. The S&P 500 was at 4,019 Wednesday morning.

Redler, who follows short-term technicals, said the next point of reference is the Nov. 15 high of 4,029.

"Yesterday the consolidation triggered to the bullish side, when the S&P took out 3,980." He said after it takes out the 200-day, the S&P could hit a high of 4,080. Some technical analysts are predicting a move to 4,150 before year end.

"Historically, Thanksgiving week tends to be a better week," Redler said. "Now the question is can we sustain this early strength? People are eyeing whether this Thanksgiving move can put us on track for the 200-day and 4,080."

Redler expects the market to get choppier after the new year.

 "Everyone wants to be long, but doesn't want to get caught. Can the market thread the needle to 4,150 before looking out to earnings in 2023?" he said.

--Patti Domm

At least 13 S&P 500 stocks, including TJX Companies, traded near all-time highs during Wednesday's trading session.

That included shares of retailer TJX Companies, which traded near levels not seen since its IPO in 1987. Monster Beverage, formerly known as Hansen Natural, traded around levels dating back to its 1992 listing on the Nasdaq.

These are some of the stocks that notched all-time or 52-week highs:

• General Parts Company trading at all-time high levels back to its IPO in 1948
• O'Reilly Auto trading at all-time high levels back to its IPO in April 1993
• Ross Stores trading at levels not seen since November 2021
• Marathon Petroleum trading at all-time highs back to its spinoff from Marathon Oil in June 2011
• Aflac Inc. trading at all-time high levels back through available data since 1973
• Arthur J Gallagher trading at all-time high levels back to its IPO in June 1984
• MetLife trading at all-time high levels back to when it became a publicly traded company in April 2000
• Biogen trading at levels not seen since September 2021
• Merck & Co. trading at all-time high levels back through available data to 1978
• Vertex Pharma trading at all-time highs back to its IPO in July 1991
• PACCAR trading at all-time high levels back to its IPO in 1971
• Snap-On trading at levels not seen since June 2021
• Automatic Data Processing trading at all-time high levels back through available data to 1974
• International Business Machines trading at levels not seen since February 2020
• Constellation Energy trading at all-time high levels back to its spin-off from Exelon in January 2022

— Samantha Subin, Chris Hayes

Deere shares gained more than 6% Wednesday after the company posted a beat on the top and bottom lines, and shared a 37% jump in revenues on a year-over-year basis.

Earnings for the heavy equipment maker came in 33 cents above Wall Street's estimates. Deere reported revenues of $14.35 billion, topping expectations of $13.39 billion according to StreetAccount.

The company also shared an upbeat forecast for the new fiscal year that surpassed Wall Street's expectations, saying net income should range between $8 billion and $8.5 billion.

Deere indicated that both demand for its products, and volumes, remain high even as prices rise, noting that it's benefitting from "favorable industry fundamentals."

— Samantha Subin, Robert Hum

Oil stocks may cap off 2022 as the clear market winners in this year's market shakeup, but investors should prepare for financials and industrial stocks to take the reigns in 2023, said DCLA's Sarat Sethi.

"They're still going to do well, but I don't think they're going to lead us out of there," he told CNBC's "Squawk on the Street" on Wednesday. "I think financials could lead us out of there," as could certain industrials.

To be sure, Sethi expects oil and gas companies to remain in leadership positions, but sees untapped value in many "old playbook" companies.

Sethi did not offer specific stock picks, but broadly said some industrial companies offer strong pricing power and continue to optimize their balance sheets and create operating leverage.

Companies in the commodities space may also perform well as demand for certain metals outweighs supply.

"The playbook is different and I think investors have to look at specific sectors, specific companies, not just kind of say, 'Hey, everything is going to ride,'" he said.

— Samantha Subin

Stocks ticked up at Wednesday's open in the last full trading day of the week. Markets will be closed Thursday for the Thanksgiving holiday and will close early on Friday.

The Dow Jones Industrial Average rose 98 points, or 0.29%. The S&P 500 gained 0.27% and the Nasdaq Composite increased 0.45%.

—Carmen Reinicke

Oil lost gains early in the day as the Group of Seven nations considered a price cap on Russian oil.

Brent crude futures lost $3.42, which equates to 3.9%, to trade at $84.94 a barrel. U.S. West Texas Intermediate (WTI) crude futures dropped $3.16, or 3.9%, to $77.79 a barrel.

It follows gains of more than $1 per barrel earlier. The drop came after it became clear that the price cap on Russian oil would be above the level it is currently trading at, UBS commodity analyst Giovanni Staunovo told Reuters.

— Alex Harring

Dick's Sporting Goods performed in the third quarter and is well-positioned for the fourth, according to Citi.

Analyst Paul Lejuez said in a note to clients that the retailer is one of few that had held onto customers from the pandemic and has not had to resort to promotions as much as others have due to their inventory gluts. Though management gave conservative guidance for the fourth quarter, the retailer could beat expectations again, he said.

Lejuez reiterated the stock's buy rating and increased the target share price to $143, which implies an upside of 21.4% compared with where it closed on Tuesday.

"We continue to believe the market underappreciates the secular changes favoring DKS and undervalues the stock," Lejuez said in the note.

The stock has gained 2.4% since the start of 2022. It gained 10.1% in trading Tuesday, which was the same day it reported beating expectations for revenue, per-share earnings and comparable store sales.

— Alex Harring

Shares of Tesla gained more than 2% Wednesday after Citi upgraded the stock to a neutral from a sell rating.

The recent stock rout — with shares down more than 25% this month — creates a "balanced" near-term risk-reward for investors, said analyst Itay Michaeli.

CNBC Pro subscribers can read more on the upgrade here.

— Samantha Subin

Jobless claims rose to 240,000 in the week ending Nov. 19, the Department of Labor reported Wednesday. That was higher than the 225,000 economists expected and also notched the highest level since the second week of August.

Continuing claims also edged higher, hitting 1,551,000. That is the highest level since the first week of March.

Durable goods for October were also released Wednesday ahead of the Thanksgiving holiday Thursday. The report showed that durable goods orders increased 1% in October, more than the 0.5% expected.

—Carmen Reinicke

Earnings season continued and led to big premarket swings for certain stocks. Here's what shares were making the biggest moves before the bell Wednesday.

Manchester United (MANU) – Manchester United rallied another 9.5% in the premarket, following yesterday's 14.7% jump, after the soccer club said it was considering strategic alternatives including a possible sale.

Autodesk (ADSK) – Autodesk matched top and bottom line estimates in its latest quarterly report, but the maker of design software issued weaker-than-expected guidance for the current quarter. Autodesk noted a challenging economic environment and said customers were more reluctant to sign longer-term contracts. The stock tumbled 9.8% in premarket trading.

Guess (GES) – Guess lost 6.1% in the premarket after reporting weaker-than-expected quarterly earnings and a reduced outlook. The apparel company pointed to a challenging retail environment and the impact of a stronger U.S. dollar, although it said it is well-positioned for the holiday season.

Read more here.

—Carmen Reinicke, Peter Schacknow

Bank of America is keeping its bearish stance on risk assets in the first half of 2023, according to a Tuesday note by strategist Michael Hartnett. But that will likely turn bullish in the second half of the year as the narrative shifts from inflation and rate shocks to recession and credit shocks.

The firm will be "…long bonds in H1, maintain SPX nibble at 3.6k, bite at 3.3k, gorge at 3.0k entry points; Fed rate cuts…long stocks and credit in H2," Hartnett wrote.

Bank of America forecasts a mild recession next year, with the Federal Reserve pivoting in June or July "just before $1.6tn of US corporate refi begins and only after interest rate tightening visibly hurts Main St."

That would be the most bullish outcome for Wall Street, and easing financial conditions would lead to a new bull market for stocks and corporate bonds in the second half of 2023 through 2024.

—Carmen Reinicke

Mortgage applications ticked higher by 2.2% last week on a week-over-week basis, as rates declined slightly, according to the Mortgage Bankers Association's seasonally adjusted index. Refinance applications also rose 2% for the week. However, they're still 86% the levels seen one year ago.

Read the full story here.

— Diana Olick

European markets were flat on Wednesday as investors assessed euro zone economic data and awaited the U.S. Federal Reserve's latest meeting minutes.

The pan-European Stoxx 600 index was little changed in early trade, with mining stocks adding 1.2% while autos fell 0.7%.

The European blue chip index closed Tuesday's session up 0.8% at its highest level in three months.

- Elliot Smith

Credit Suisse on Wednesday projected a 1.5 billion Swiss franc ($1.6 billion) fourth-quarter loss as it undertakes a massive strategic overhaul.

The embattled lender last month announced a raft of measures to address persistent underperformance in its investment bank and a series of risk and compliance failures that have saddled it with consistently high litigation costs.

Shareholders will vote on the bank's restructuring and capital raising plans at an extraordinary general meeting on Wednesday.

Read the full story here.

- Elliot Smith

Shares in Coinbase came under renewed selling pressure this week on concerns about spillover from FTX's collapse earlier this month.

But many other companies are also exposed to FTX's failure. Wall Street bank Morgan Stanley has identified a slew of additional firms exposed to failed crypto exchange.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Electric vehicle batteries are gaining "critical importance" amid the energy transition, according to Goldman Sachs.

The investment bank names two top stocks to play the EV battery sector, giving one upside of nearly 70%.

CNBC Pro subscribers can read more here.

— Weizhen Tan

SoFi's Liz Young said she expects that stocks are in yet another bear market rally.

"I think we've seen this a couple times already in this otherwise downtrending market," pointing to the two-month rally from June to August, and the two-month downtrend from August to October, Young said Tuesday on CNBC's "Closing Bell: Overtime."

"We're only a little bit more than a month into this. Unfortunately, I do think that this is another bear market rally," Young added.

What's more, the head of investment strategy at SoFi does not expect a Santa Claus rally ahead, given challenges to consumer spending during this year's holiday season.

Young said investors can hide in more defensive sectors of the market such as financials, health care, and even utilities. Apart from the stock market, investors should start looking at the shorter end of the Treasury curve, she said.

— Sarah Min

Shares of Nordstrom fell more than 8% in extended trading after the department store chain cut its forecast.

Still, Nordstrom's latest quarterly results beat profit and sales expectations. The retailer posted earnings of 20 cents per share on revenue of $3.55 billion. Analysts surveyed by Refinitiv were forecasting earnings of 14 cents per share on revenue of $3.48 billion.

— Sarah Min

U.S. stock futures were little changed on Tuesday night, as investors looked ahead to Federal Reserve meeting minutes for clues into the pace of future interest rate hikes.

Dow Jones Industrial Average futures rose by 4 points, or 0.01%. S&P 500 futures slipped 0.01%, while Nasdaq 100 futures dipped 0.08%.

— Sarah Min