Dow climbs about 200 points after Fed minutes point to another big rate hike this month to tackle inflation

What’s driving markets

Stocks punched higher after minutes of the Federal Reserve’s June meeting released on Wednesday reiterated a resolve by Fed officials to act aggressively through interest rate hikes given growing concerns about the possibility of inflation becoming entrenched in the economy.

Fed officials “recognized that policy firming could slow the pace of economic growth for a time, but they saw the return of inflation to 2% as critical to achieving maximum employment on a sustained basis,” the minutes said. They also indicated another large rate hike, of 50 basis points or 75 basis points likely would be approved later this month.

“These minutes are reflecting the almost extreme concern, or panicky situation, the Fed has found itself in,” said Kathy Jones, chief fixed-income strategist at the Schwab Center for Financial Research, by phone.

“But in three weeks, a lot has changed,” she said, pointing to the retreat in US oil prices below $ 100 a barrel, signs of slowing growth and the climbing US dollar, which could reflect recession fears. “It seems like a very different world from three weeks ago.”

Evidence of a slower economic growth has already begun to show as the Fed works to dramatically increase interest rates to fortify its battle against high inflation.

An ISM barometer of business conditions at service-oriented companies, such as restaurants, hotels and retailers fell slightly to 55.3% in June and hit the lowest level in two years. A reading above 50% indicates an expansion in activity.

“Talk matters,” said Gaurav Mallik, chief investment strategist at State Street Global Advisors, about the impact of tougher tones lately from Fed officials and other central bankers about the need for tighter monetary policies to tamp down high costs of living around the world.

“Our expectation is that demand destruction is already on the way,” Mallik said, by phone. While he views higher interest rates as necessary to help bring inflation back down to the Fed’s 2% target, he also worries that a “global tsunami” of monetary tightening could risk triggering a deeper US recession.

Treasury bonds yields inverted again Wednesday afternoon, with the 2-year yield trading above the 10-year yield.

“Recently a lot of the discussion has really been around this recession narrative, especially with the yield curve inverting for the third time this year,” said Lindsey Bell, chief markets and money strategist at Ally, by phone. “The market just remains on edge because there’s just a significant amount of uncertainty.”

Earlier, Asia delivered a somewhat curmudgeonly response to Wall Street’s overnight recovery. Japan’s Nikkei 225 JP: NIK
lost 1.2% and China’s Shanghai Composite CN: SHCOMP
shed 1.4% after it emerged Beijing was once again tacking COVID-19 outbreaks in several regions of the country. But European stocks rallied, with the STOXX Europe 600 Index FXXP00
closing 1.7% higher and London’s FTSE 100 Index UK: UKX
gaining 1.2%.

Companies in focus

• Kornit Digital Ltd.
  KRNT
  shares plunged about 25% Wednesday after the company cut its forecast for the second quarter Tuesday and suggested the third quarter isn’t expected to be much better.

• Shares of Rivian Automotive Inc.
  RIVN
  rallied 10% Wednesday, after the electric vehicle maker reported second-quarter deliveries and production that was “in line with the company’s expectations.”

• Uber
  UBER
  and DoorDash
  DASH
  fell after Amazon
  AMZN
  struck a partnership with Grubhub, a unit of Just Eat Takeaway UK: JET

• Tesla
  TSLA
  was down 1% even though the electric vehicle maker sold about 78,000 vehicles produced in China in June, up 142% from May, according to preliminary data released Wednesday by the China Passenger Car Association.

Other markets

• Crude prices closed in a bear market, with West Texas Intermediate crude oil futures CL

  CLQ22
  down 1% to settle at $ 98.53 a barrel.

• Gold futures GC00
  fell about 1.6% to settle at $ 1,736.50 an ounce, booking their longest losing streak since March 2019. The yellow metal sometimes struggles when the dollar rallies.

• Bitcoin BTCUSD
  is off 0.3% to 20,300.

—Jamie Chisholm contributed reporting to this article