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US shares recover at midsession after minutes reveal divided Fed

Last updated: 14:17 17 Aug 2016 EDT, First published: 09:17 17 Aug 2016 EDT

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US shares recouped losses by midsession on Wednesday after the Federal Reserve’s July rate-setting meeting minutes suggested the central bank was divided on whether to hike the cost of credit in July.

The S&P 500 index was up 0.04% at 2,179. Earlier, the market bellwether was negative throughout the early part of the session.

A divided body of Federal Reserve policymakers left open the prospect of a further interest rate rise this year even as policymakers insisted they needed more evidence on the durability of the rebound before feeling confident enough to pull the trigger.

Fed officials generally agreed that a strengthening of the jobs market and the relatively benign market reaction to the UK’s vote to leave the European Union in June meant some of the uncertainties that had hung over the US economy had diminished.

But there was no consensus on how urgent a second rate rise was given the mixed prospects at home and abroad.

The top gainer on the S&P 500 was Urban Outfitters Inc (NASDAQ:URBN), up 15.6% to $36.11 after the company's sales and earnings outpaced Wall Street estimates, helped by new fashions that resonated well with consumers.

After the closing bell on Tuesday, the retailer reported fiscal second-quarter earnings of 66 cents per share on $891 mln in revenue. Analysts expected earnings of about 56 cents a share on $886.8 mln in revenue, according to a consensus estimate from Thomson Reuters.

But the S&P Midcap 400 was less fortunate, down 0.3% to 1,549 and led by defence group Leidos Holdings Inc (NYSE:LDOS) down 25.6% at $38.44. In the news, Lockheed Martin Corp. (NYSE:LMT) completed the spin-off of its Information Systems & Global Solutions business segment and combined it with a Leidos Holdings, subsidiary on Tuesday. The spin-off was announced this January using a tax-efficient Reverse Morris Trust transaction.

The S&P Smallcap 600 was down 0.2% at 744 and led by retailer Barnes & Noble NYSE:BKS) down 12% at $11.78. Barnes & Noble tumbled after the bookseller said CEO Ronald Boire is leaving after less than a year in the job. The company said its board determined that Boire was not a good fit. Chairman and former CEO Leonard Riggio, who was scheduled to retire next month, will stay with the company as it seeks a new CEO.

Barnes & Noble has been cutting costs and closing stores as it copes with people doing more of their shopping online and at discount stores.


Pre-Open

US stocks are set to open mixed, as investors sit on their hands ahead of the release of the minutes of the Fed’s policy makers’ meeting.

“The Federal Reserve has very much come back into focus in recent days after John Williams suggested that a higher inflation target may be more suitable for the US economy in the current environment of sluggish growth,” noted Craig Erlam of forex trading platform operator OANDA.

“These comments suggest Williams opposes further rate hikes despite certain economic indicators indicating that such a move would be suitable, which poses the question of what other policy makers share this view and is there therefore a reluctance within the Fed to do so?” Erlam added.

While the S&P 500 index is looking at opening maybe a point higher at around 2,179, the Dow Jones average is, according to spread betting quotes, looking at a fall of around 17 points.

Retailers Lowe’s Companies Inc (NYSE:LOW) and Target Corporation (NYSE:TGT) have both underwhelmed with trading updates and were among the big blue-chip fallers in pre-market trading.

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