Stock Market Update

[BRIEFING.COM] The S&P 500 (-0.34%) is in second place on Wednesday afternoon, down about 25 points; the major averages are little changed across the board following the release of the FOMC's June 16-17 meeting minutes.

The June FOMC minutes showed a Fed maintaining a data-dependent stance as elevated inflation, geopolitical tensions, and AI-driven demand continued to shape the economic outlook. Financial markets strengthened during the period, with equities reaching new highs, Treasury yields and the U.S. dollar moving higher, and longer-term inflation expectations remaining anchored despite persistent near-term price pressures.

Participants noted market pricing shifted toward fewer expected rate cuts, with survey respondents anticipating no change in the federal funds rate through early 2027 and one cut in the second quarter of next year. While a few participants acknowledged a case for raising rates, all supported leaving policy unchanged, emphasizing that future decisions will depend on incoming economic data.

On the economic backdrop, inflation remained elevated, with total PCE estimated at 4.1% in May and core PCE at 3.4%, reflecting higher energy costs, tariff effects, and AI-related demand. The labor market remained stable with unemployment at 4.3%, while GDP continued expanding at a solid pace, supported by resilient consumer spending and continued investment in AI infrastructure.

The staff outlook projected inflation to ease gradually toward the Fed's 2% target by 2028 as energy and tariff-related pressures fade, while GDP growth is expected to remain near or modestly above potential, supported by AI investment and productivity gains. However, officials continued to view risks as tilted toward higher inflation and weaker growth given uncertainty surrounding the Middle East conflict and the economic effects of AI adoption.