Stock Market Today: Indexes Trade Mixed on Higher Inflation, Rates Outlook

• US stocks closed mixed as traders took in the Fed minutes and adjusted their rates outlook.
• Central bankers saw inflation risks stemming from Trump’s trade policy.
• Investors are pricing in one to two rate cuts over the next year, according to the CME FedWatch tool.

US stocks closed mixed on Wednesday as investors took in the Fed’s latest meeting minutes and adjusted their expectations for interest rates in the coming year. The S&P 500 and tech-heavy Nasdaq Composite ended the trading session in the red, while bond yields climbed.

Minutes from the Fed’s December FOMC meeting showed that central bankers saw upside risks to their inflation forecasts stemming from Trump’s trade policy, which includes possibly levying steep tariffs on other countries.

Trade policy is one factor that could keep inflation in 2025 at around the same level it was last year, the minutes said, though it noted that central bankers viewed their baseline projection as “uncertain.”

“The risks around the inflation forecast were seen as tilted to the upside, as core inflation had not come down as much as expected in 2024 and the effects of trade policy changes could be larger than the staff had assumed,” the minutes said.

Traders continued to adjust their interest rate expectations, with most investors anticipating just one to two rate cuts over the course of 2025. Markets are pricing in a near-100% chance the Fed will pause its rate-cutting cycle at its January policy meeting, and a 61% chance it will pause rates in February as well, according to the CME FedWatch tool.

Bond yields also spiked in the early morning, reflecting higher rate expectations after CNN reported that Trump was considering invoking emergency powers to carry out his tariff plan.

The Trump-Vance team did not respond to a request for comment from Business Insider.

Here’s where US indexes stood at the 4:00 p.m. closing bell on Wednesday:

Investors, meanwhile, have their eye on Friday’s jobs report, which should serve as a key data point for central bankers when making their next rates decision at the end of the month.

“Markets could get choppy if there is a surprise in Friday’s payroll release. A softer job market could lift the unemployment rate, giving the Fed reason to cut rates later this quarter. Some industry data are hinting at softer hiring across the economy,” Jeffrey Roach, the chief economist at LPL Financial, said in a statement.

Here’s what else happened today:

In commodities, bonds, and crypto:

• West Texas Intermediate crude oil slumped 1.10% to $73.44 a barrel. Brent crude, the international benchmark, inched up 0.16% to trade at $76.28 a barrel.
• Gold moved up 0.5% to $2,662 an ounce.

• The 10-year Treasury yield dipped one basis point to 4.673%.

  Bitcoin edged lower 2.28% to $93,994.