By Will Horner and Caitlin McCabe
U.S. stocks wobbled Wednesday as investors awaited notes from the Federal Reserve's last policy meeting for clues on how officials view inflation and the pace of economic recovery.
All three major U.S. stock indexes swung between gains and losses as stocks struggled to find direction. In recent trading, the broad benchmark S&P 500 edged up less than 0.1%, while the Dow Jones Industrial Average lost about 15 points, or 0.1%. The technology-heavy Nasdaq Composite fell 0.1%.
U.S. stock trading volumes have fallen in recent days as volatility in both the stock and bond markets have calmed. On Tuesday, the New York Stock Exchange and Nasdaq both saw their lowest volume day of the year.
"I'm like, 'Is my computer off? Nothing [on my screen] is changing,'" said JJ Kinahan, chief market strategist at TD Ameritrade. He added that as investors prepare to parse the Fed's minutes at 2 p.m. ET, "nobody wants to get ahead of that. You don't want to put all your chips on one side before you see the notes."
Investors have been closely watching for clues from the central bank in recent months as concerns about inflation have swelled. Some have worried that continued economic growth, coupled with government spending, could prompt the Fed to pull back on its support of the economy and markets earlier than expected.
Fed Chairman Jerome Powell has tried to assuage investors, reiterating that the central bank will provide support as long as it takes. Central bankers in March voted unanimously to maintain overnight interest rates near zero and to continue purchasing at least $120 billion of Treasury bonds and mortgage-backed securities monthly.
Signs of economic growth have proved to be a double-edged sword for markets lately. Despite fears that an overheated economy could eventually lead to tightening of monetary policy, investors have simultaneously cheered data that has shown that recovery from the Covid-19 pandemic is under way. On Monday, enthusiasm over the strong March jobs report propelled the S&P 500 and the Dow to fresh records.
In general, markets have kicked off the second quarter on a high note, helping widen the stock market's rally. Nearly 95% of companies in the S&P 500 are now trading above their 200-day moving average, according to Dow Jones Market Data, the highest figure since May 2013. On Wednesday alone, stocks ranging from Amazon.com to Carnival to Hess all gained 1.9% or more.
"We had been expecting the data to improve about this time, and early signals are that the recovery is absolutely on track," said Hugh Gimber, global market strategist at J.P. Morgan Asset Management. "This is the period where the forecast of a strong recovery in growth is starting to look more like the fact of a strong recovery in growth."
U.S. stock investors have been encouraged lately by signs of stabilization in the government-bond market, as bond yields have ticked down after climbing sharply from the start of the year. The yield on the benchmark 10-year U.S. Treasury note fell on Wednesday to 1.650%, from 1.656% on Tuesday.
The recent slip in yields has provided some respite for technology stocks, which had come under pressure from the higher borrowing costs. But many investors continue to bet that it will be the economically sensitive sectors such as banks and energy that stand to benefit most from a reopening.
On Wednesday, the S&P 500's energy sector posted the largest gain of the index's 11 groups. It has also posted the biggest rally year-to-date.
"The value play is still very much on the table as the economy expands," said Mr. Walsh. "For the last 10 years, everything was about growth stocks, and now we are seeing a changing of the guard."
In commodity markets, Brent crude, the international oil benchmark, edged up 0.4% to $62.96 a barrel.
Overseas, the pan-continental Stoxx Europe 600 gauge ticked down 0.2%.
In Asia, most major stock indexes were mixed. Japan's Nikkei 225 edged 0.1% higher, while Hong Kong's Hang Seng fell 0.9%. In mainland China, the Shanghai Composite Index dropped 0.1%.
Write to Will Horner at William.Horner@wsj.com and Caitlin McCabe at firstname.lastname@example.org
(END) Dow Jones Newswires