The market has whipsawed over the last week, feeling the aftereffects of the Fed's surprise projection last week for rate increases as soon as 2023, which knocked stocks, boosted the dollar and led to the flattening of the U.S. bond yield curve, according to Reuters.
The dollar ended higher, reversing earlier losses on Wednesday as two Fed officials said that a period of high inflation in the United States could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures.
Powell on Tuesday reassured markets by saying the central bank will watch a broad set of job market data to assess the economic recovery from COVID-19, rather than rush to raise rates on the basis of fear of inflation.
Ten-year Treasury yields inched higher but remained below 1.5% in muted trading.
Strong manufacturing data and a rally in Tesla Inc (TSLA.O) lifted the Nasdaq (.IXIC), which gained 0.13 percent. The Dow Jones Industrial Average (.DJI) fell 0.21 percent and the S&P 500 (.SPX) lost 0.11 percent.
"The market is caught between not knowing what to believe about the coming few quarters, whether a slowdown will emerge," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. "We’re going back and forth depending on thoughts about interest rates and whether they are going to need to go up faster than expected or not."
Flash U.S. manufacturing PMI climbed to a record high in June, supporting Wall Street shares in early trade. But manufacturers are still struggling to secure raw materials and qualified workers, substantially raising prices for both businesses and consumers.
Sales of new U.S. single-family homes fell to a one-year low in May, likely hindered by expensive raw materials such as lumber, which are boosting the prices of newly built homes.
"The biggest debate in the market is if inflation is transitory or permanent," said JJ Kinahan, chief market strategist with TD Ameritrade. "I would expect this pattern of trading without great conviction to continue with quick adjustments until earnings start."
The 10-year U.S. Treasury yield stood at 1.4869% .
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