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Stocks drift slightly below record highs

Stocks traded little changed Wednesday as investors considered the latest batch of stronger-than-expected economic data and digested meeting minutes from the Federal Reserve. 

Each of the three major indexes hugged the flat line, with the S&P 500 and Dow hovering near record levels. 

Investors this week have been digesting a spate of better-than-expected economic data, with job growth accelerating faster-than-anticipated, an index of service sector activity reaching a record level and manufacturing activity expanding by the most in decades in recent months. The International Monetary Fund upgraded its global growth forecast to 6% this year from the 5.5% rise seen previously, largely reflecting the quick recovery in the U.S. economy. And JPMorgan Chase CEO Jamie Dimon said Wednesday that the current U.S. economic boom “could easily run into 2023” amid the massive fiscal and monetary policy support provided to individuals and businesses. 

“Clearly the market today is telling you, don’t try to bend the trend. There’s an upward bias to the market – it’s a fairly strong upward bias and until it breaks, you want to, I think, be heavily in equities,” George Ball, Sanders Morris Harris CEO, told Yahoo Finance on Wednesday. “But when prices do break, the market clearly is seeking some form of new leadership, [so] I don’t think smart investors would be wise to buy a dip quickly.”

But even given these upbeat signals, inflation concerns that had weighed on investors in recent weeks at least temporarily attenuated, and the yield on the 10-year Treasury note fell back toward 1.65%, or about 10 basis points below last week’s highs. 

The Federal Open Market Committee’s March meeting Wednesday afternoon also offered a look at how monetary policymakers were thinking about the conditions sufficient to warrant an adjustment to their policy stance, and what level and duration of inflation might prompt a move. In these, “participants noted that the economy was far from achieving the [FOMC’s] broad-based and inclusive goal of maximum employment,” suggesting a sharper and more sustained rebound would be needed before policymakers begin to think about tightening. 

Investors have also been eagerly awaiting first-quarter earnings season in the coming weeks, with the reports likely to show corporate profits grew in tandem with strengthening economic conditions. 

In the near-term, additional incoming signs of economic expansion are likely to continue buoying equities. However, as growth starts to taper after an initial surge off last year’s virus-depressed levels, the march higher in stocks could also take a pause, some strategists warned. 

“Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher,” Deutsche Bank strategist Binky Chadha wrote in a note. “But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months.”

“We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation,” Chadha added. “Further out, late summer and into the fall we see the risks to inflation as being to the upside.”

3:10 p.m. ET: Nikola shares dip after company loses fuel-cell development head 

Nikola (NKLA) shares sank 5% Wednesday afternoon after the company said its head of fuel-cell development departed from the company. 

Jesse Schneider, executive vice president of technology, hydrogen and fuel cells, left Nikola at the start of April, Bloomberg first reported. 

The departure comes at an especially inauspicious time for Nikola, considering that General Motors late last year pared back plans to work on an electric pick-up truck with Nikola, leaving the company to rely more heavily on in-house development. Its hydrogen powered truck is scheduled to go into production at a factory still under construction in Arizona in 2023. 

2:09 p.m. ET: FOMC meeting minutes show participants viewed economy as ‘far from’ reaching Fed goals 

The Federal Open Market Committee’s March meeting minutes showed most FOMC members still felt the economy had a long way to go before reaching the central bank’s targets on labor participation and inflation, suggesting adjustments to the current, highly accommodative monetary policy stance were unlikely in the near-term. 

“Participants noted that the economy was far from achieving the Committee’s broad-based and inclusive goal of maximum employment,” according to the minutes. “Some participants commented that labor force participation continued to be held down by workers’ health concerns and additional childcare responsibilities associated with virtual schooling and that the pace of recovery…

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