U.S. stock market closes lower Monday ahead of Fed meeting minutes

Major indices in the U.S. stock market closed lower on Monday ahead of the publication of the Federal Reserve meeting minutes and ahead of the Thanksgiving holiday, which will cause a shorter trading week.

The S&P 500 closed at 3,949.94, shedding 0.39 percent or 15.40 points. The Nasdaq Composite, which hosts mostly tech stocks, closed at 11,024.51, falling by 1.09 percent or 121.55 points. Meanwhile, the Dow Jones Industrial Average recorded a 0.13 percent fall, or 45.41 points, and closed at 33,700.28.

Energy and consumer stocks became the biggest weights. Energy companies like Diamondback Energy Inc, Halliburton and Marathon Oil were the major contributors to the downfall. On Monday, energy stocks declined by one percent.

Analysts said China’s heightened COVID-19 restrictions due to rising cases had influenced the energy market. China is one of the world’s biggest energy importers, and activity restrictions can lead to a decrease in energy demand.

Oil prices momentarily went down following the news from China and rumors that the Organization of Petroleum Exporting Countries and its allies (OPEC+) were considering an oil production boost in December. Saudi Energy Minister Abdulaziz bin Salman quickly dispelled the rumor to recover some losses that the oil market had recorded that day.

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On the other hand, the plunge in consumer stocks was largely caused by the drop in Tesla’s shares, which nearly fell by seven percent to $167.87 per share. China is one of Tesla’s biggest markets. Therefore, COVID-19 restrictions in the country’s big cities put Tesla’s production and sales at risk.

Companies like Las Vegas Sands, MGM Resorts and Caesars Entertainment Corporation also played a role in the plunge of consumer stocks. DraftKings Inc dropped by more than five percent after reports of hacking attacks on customer accounts.

For the Dow Jones, however, the losses caused by the energy and consumer sectors were moderated by a six-percent growth in Walt Disney’s shares after the company replaced now-former chief executive Bob Chapek with Bob Iger.

The Fed will publish November’s FOMC meeting minutes on Wednesday. Investors are waiting for the minutes to get insights into whether the central bank will make a policy pivot anytime soon.

Some Fed officials have made public statements indicating that the hawkish policy may stay longer than expected. Loretta Mester and Raphael Bostic, presidents of Cleveland and Atlanta Fed, respectively, agreed that the central bank needed to slow down its rate hikes.

The Fed has hiked the benchmark rates by 75 basis points three consecutive times. Mester insisted that the Fed had yet to consider stopping its rate hikes.

U.S. inflation

According to Mester, the Fed still aims to hit a two-percent inflation rate even if the market remains stubborn. She said the central bank had “more work to do.”

“We’ve had some good news on the inflation front, but we need to see more good news and sustained good news to make sure that we are returning to price stability as soon as we can,” Mester said.

Consumer price index in October estimated that the inflation was still at a 7.7 percent annual rate, lower than the earlier estimates but still above the Fed’s target. The job market reports in the same month also showed that it remained strong.

The Fed has received criticisms from several parties due to its focus on bringing down inflation. Analysts said that they could potentially damage the economy.

In response, Mester asserted that the central bank tried to find a way to control inflation “as painlessly as possible.”