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Wall Street Sees Drop Following Fed Minutes and Inflation Reports

U.S. stocks closed lower on Wednesday due to the Federal Reserve's March policy meeting minutes, which revealed concerns among several Federal Open Markets Committee (FOMC) members about the regional bank liquidity crisis.

Wall Street sign
Wall Street sign

Inflation Report Hints at Another Rate Hike

A cooler-than-expected inflation report, which showed stickier underlying data, strengthened the likelihood of another policy rate hike when the Fed meets next month. This led to all three major U.S. stock indexes closing in negative territory.

Parsing the Labor Department's CPI

Market participants analyzed the Labor Department's Consumer Price Index (CPI), causing indexes to fluctuate. The CPI report came in below analysts' expectations, suggesting the Fed's efforts to control inflation are working.

Core CPI Remains Above Fed's Target

However, the core CPI, which excludes volatile food and energy items, matched consensus estimates and remained above the Fed's average annual 2% target rate.

Investors Brace for Corporate Earnings and PPI Report

As investors search for more stable footing before corporate earnings and the upcoming Producer Prices report, economic data has been mixed, leading to overreactions and volatility in response to any Fed rate hike policy indication.

70% Likelihood of Interest Rate Hike Next Month

Financial markets have priced in a 70% chance of another 25 basis point interest rate hike after the FOMC's policy meeting next month.

Q1 Earnings Season Set to Begin

The first-quarter earnings season will start on Friday with results from three major banks: Citigroup Inc, JPMorgan Chase & Co, and Wells Fargo & Co. Analysts now expect a 5.2% year-on-year drop in aggregate first-quarter S&P 500 earnings, a significant reversal from the 1.4% annual growth seen at the beginning of the quarter.

Market Indices and American Airlines Slump

The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average fell, while American Airlines Group Inc slid after forecasting a lower-than-expected first-quarter profit.