By Alexander Lee

Wednesday saw Wall Street's major stock indexes make modest gains after a day of fluctuating trading, as investors sifted through the Federal Reserve's latest interest rate policy meeting minutes. The S&P 500 rose 14 points to 3,845, marking its third consecutive gain. Meanwhile, the Dow Jones Industrial Average increased by 0.2%, and the Nasdaq went up by 0.4%. 

On the other hand, small company stocks continued to struggle, reflecting investors' concerns about the potential for economic growth. The Russell 2000 dropped by 0.8%.

The minutes from the Federal Reserve's last month's two-day meeting revealed that the central bank's policymakers concluded higher interest rates might be required to restrain a worrying trend of consumers expecting higher inflation. The policymakers also admitted that more rate hikes could dampen the economy. 

Tom Martin, senior portfolio manager with Globalt Investments, noted that there were no major surprises for Wall Street in the Fed's minutes. He stated that what the Fed says in July will be of much greater interest.

Tech companies made gains, balancing out losses from energy companies. Nvidia saw a 1% increase, while Exxon Mobil dropped by 2% as crude oil prices declined.

The yield on the 10-year Treasury note, which influences mortgage rates, rose significantly, reaching 2.93% from Tuesday's 2.81%. 

Despite these gains, the broader market is still in a significant slump, with the S&P 500 being over 20% below its most recent high, putting it in a bear market.

Central to Wall Street's worries is the Federal Reserve's efforts to combat inflation and the risk that its strategy could result in a recession.

Inflation has hit businesses and consumers hard throughout the year. This was exacerbated by Russia's invasion of Ukraine in February and China's lockdowns of key cities to manage rising COVID-19 cases, both of which worsened supply chain issues.

Rising oil prices have also contributed to inflation, sending U.S. gasoline prices to record highs. Although U.S. crude oil prices have increased by 27% this year, they have started to decline this week, which has been a positive sign for the market.

Central banks worldwide have been raising interest rates to tackle inflation. The Federal Reserve has been particularly proactive, moving from historically low interest rates during the pandemic to substantial rate hikes at present. This has raised fears that the central bank could go too far and stall economic growth, possibly leading to a recession.

Currently, easing energy prices could translate to lower gasoline prices in the coming weeks and may indicate that inflation is reaching its peak. A cooling housing market could also be a sign that inflation is starting to ease.

Katie Nixon, chief investment officer for Northern Trust Wealth Management, stated that the easing of energy prices takes some pressure off the Federal Reserve. If gasoline prices decline, consumer sentiment could improve, potentially allowing the Fed to ease off its aggressive stance.

Investors will be watching closely for more economic data that could provide insights into the trajectory of inflation and what that means for the Federal Reserve's future actions. This includes the U.S. government's release of employment data for June on Friday.

Reporter Alexander Lee alexanderlee_24@newsyn.co.kr