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S&P 500, Nasdaq gain in choppy trading; cyclicals rise

U.S. stock indexes swung between gains and losses on Thursday after minutes from the Federal Reserve’s last meeting struck a hawkish note, buoying cyclical sectors, while technology shares were mixed after suffering big losses this week.


Seven of the 11 major S&P sectors fell. Economy-sensitive energy (.SPNY), financials (.SPSY) and industrials (.SPLRCI) rose.


The communication services sector (.SPLRCL) recouped early losses to move 1.2% higher as Meta Platforms (FB.O) jumped 4.1%, also providing the biggest boost to the S&P 500 <.SPX> and the Nasdaq (.IXIC) indexes.


The banking sub-index (.SPXBK) rose 1.8%, tracking the benchmark U.S. 10-year Treasury yield , which touched its highest level since April 2021 on Thursday.


So far this week, market participants have rotated out of technology-heavy growth shares and into cyclicals that stand to benefit the most in a high interest rate environment.


The S&P 500 value index (.IVX) is set for its third straight weekly gain, while its growth counterpart (.IGX), down 3.1%, tracked its worst week since early October.


“People now are recognizing that rate hikes are coming and the question is just the timing of that,” said David Keller, chief market strategist at StockCharts.com.


“What we’re seeing so far in early 2022 is a similar sort of environment of elevated volatility, elevated uncertainty, and elevated interest rates, and the reality of what higher rates are going to mean for different sectors.”


The S&P 500 energy sector (.SPNY) has jumped nearly 8.5% so far this week, its best weekly performance in nearly eight months.


Minutes from the Fed’s December meeting signaled the possibility of sooner-than-expected rate hikes and stimulus withdrawal to curb inflation.


“The hawkish tone of the FOMC (the Federal Open Market Committee) minutes suggests that the central bank is concerned about inflation,” said Nancy Davis, founder of Quadratic Capital Management.


“We believe the Fed is likely to be more prudent and take longer than the market expects to evaluate the economy before embarking on a swift rate hiking cycle and balance sheet reduction plan.”


At 12:30 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 41.99 points, or 0.12%, at 36,365.12, the S&P 500 (.SPX) was up 11.66 points, or 0.25%, at 4,712.24, and the Nasdaq Composite (.IXIC) was up 40.87 points, or 0.27%, at 15,141.04.


Mega-cap stocks including Google owner Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O), Amazon.com Inc , Tesla Inc (TSLA.O) and Apple Inc (AAPL.O) were mixed in early afternoon trading.


Netflix Inc slipped 1.9% after J.P. Morgan cut its price target on the movie streaming platform’s stock.


After a stronger-than-expected ADP private payrolls report on Wednesday, the Labor Department’s more comprehensive nonfarm payrolls data for December will be closely watched on Friday.


Data on Thursday showed the number of Americans filing new claims for unemployment benefits rose last week. Separately, U.S. services industry activity slowed more than expected in December, but supply bottlenecks appear to be easing.


Advancing issues outnumbered decliners by a 1.31-to-1 ratio on the NYSE and by a 1.10-to-1 ratio on the Nasdaq.


The S&P index recorded 32 new 52-week highs and one new low, while the Nasdaq recorded 49 new highs and 468 new lows.

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