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Stocks post biggest daily reversal in 14 months amid Fed jitters

CNBC logo CNBC 4/5/2017 Fred Imbert

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Stocks erased earlier gains to close lower Wednesday after the Federal Reserve released the minutes from its March meeting. 

The Dow dropped 41 points, with Goldman Sachs contributing the most losses. The 30-stock index had traded nearly 200 points higher earlier in the session. The S&P 500 gave up 0.31 percent, with financials lagging. The Nasdaq slipped 0.58 percent after hitting an all-time high earlier in the session.

For the Dow and the S&P 500, it was the biggest single-day reversal in 14 months.

The minutes showed Fed officials want to start unwinding the central bank's massive $4.5 trillion balance sheet later this year.

Unwinding the balance sheet is significant both because of its sheer size and the impact it could have on markets, as Fed members including Chair Janet Yellen have indicated that the move itself would amount to a rate hike.

U.S. Treasurys traded lower after the minutes' release, with the benchmark 10-year note yield rising to 2.38 percent and the short-term two-year note holding around 1.27 percent.

On the data front, private payrolls rose by 263,000 last month, well above a consensus estimate of 185,000. The February number was revised significantly lower, however, from the originally reported 298,000.

"The ADP report really seemed to contradict some of the negative bias in the market," said Eric Wiegand, senior portfolio manager at the Private Client Reserve at U.S. Bank. He noted some market participants were worried that last month's weather could have had an adverse impact on hiring.

The report serves as a preamble for the Bureau of Labor Statistics' monthly employment report, which will be released at 8:30 a.m. ET.

"We're probably going to get a much better-than-expected nonfarm payrolls report on Friday," said Randy Frederick, vice president of trading and derivatives at Charles Schwab. The U.S. economy is expected to have added around 180,000 jobs in March, according to a Reuters estimate.

Other data released Wednesday the Institute for Supply Management non-manufacturing index which came in at 55.2, below an expected read if 57.

The dollar rose 0.2 percent against a basket of major currencies, with the euro near $1.065 and the yen around 111.3.

In corporate news, JAB announced Wednesday it will buy Panera bread for $315 per share, or around $7.5 billion. The announcement sent Panera's stock flying more than 13 percent higher.

Overseas, European equities traded mostly higher while Asian equities also rose as investors turned their eyes to President Donald Trump's meeting with Chinese President Xi Jinping.

Schwab's Frederick said the two-day meeting in Mar-a-Lago will be "the wildcard" this week. He said he expects the meeting to go well, noting Trump has been cordial with other world leaders that have visited the country recently.

"It would surprise me very much if he acts though in person [with Xi]. He doesn't seem like he does that," Frederick said.

About two stocks advanced for every decliner at the New York Stock Exchange, with an exchange volume of 396 million and a composite volume of 1.925 billion in afternoon trade.

CNBC's Jeff Cox contributed to this report.


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