U.S. equities and stock exchange traded funds were relatively flat Wednesday ahead of minutes out of the Federal Reserve’s policy meeting, with the energy sector dragging on markets on a projected expansion in U.S. crude oil stockpiles.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were unchanged mid-Wednesday.
Traders remained relatively calm and waited on further guidance out of the Federal Open Market Committee’s minutes after policy makers, including Fed Chair Janet Yellen, hinted at possible rate hikes in the upcoming meeting.
“It is no more a question of whether they will raise rates, but when they are going to do it,” Jim Davis, regional investment manager at U.S. Bank Private Client Group, told Reuters.
Many traders don’t expect a rate hike until June, despite strengthening economic indicators. Federal-fund futures reveal options traders are betting on a 22% change of a rate hike in the Fed’s upcoming March meeting.
Dragging on markets, the energy sector weakened, with the the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, down 0.9% Wednesday.
The energy sector slipped on forecasts that U.S. crude stockpiles expanded. The Energy Information Administration will provide definitive inventory data Wednesday.
“The fundamentals actually do matter sometimes,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc., told Bloomberg. “We’re expecting the API and EIA to report another supply build. The focus is returning to the reality that fundamentally we’re oversupplied.”
Despite the Organization of Petroleum Exporting Countries’ efforts to curtail production, U.S. producers, notably the upstart shale industry, have ramped up productiong as crude prices increased, capping any gains in the oil market.
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