Stocks close off highs, dollar off on Trump chaos, Fed minutes

Reuters
Dollar banknotes are seen in this picture illustration taken June 13, 2017. REUTERS/Dado Ruvic/Illustration

By Sinead Carew

NEW YORK (Reuters) - Wall Street edged higher on Wednesday but closed well off session highs and the dollar fell on the latest turmoil in Washington and U.S. Federal Reserve meeting minutes that showed worries about low inflation.

U.S. Treasury yields fell with benchmark yields retreating from one-week highs after the July meeting minutes and as investors worried that a backlash against President Donald Trump's comments after a violent weekend rally would stunt his ability to deliver on his pro-business promises.

Fed policymakers were ready to roll a plan to shrink its balance sheet but were increasingly wary about weak inflation and some called for a halt to interest rate hikes until it was clear the trend was transitory, according to the minutes.

"Maybe they're a little more malleable in their views than a lot of people thought," said Nathan Thooft, head of asset allocation at Manulife Asset Management in Boston. "Risk assets are OK with it because they don't want a shock to the upside on yields."

The Dow Jones Industrial Average (.DJI) rose 25.88 points, or 0.12 percent, to 22,024.87, the S&P 500 (.SPX) gained 3.5 points, or 0.14 percent, to 2,468.11 and the Nasdaq Composite (.IXIC) added 12.10 points, or 0.19 percent, to 6,345.11.

U.S. stocks got a boost from the Fed minutes but still ended below their highs. Sellers emerged when Trump disbanded two high-profile advisory councils after several CEOs quit to protest his comments about violence in Charlottesville, Virginia.

"This calls into question the ability of the Trump administration to get anything done in terms of tax and infrastructure reforms. It's another piece of evidence of the administration's mounting problems," said John Doyle, Director of markets at Tempus Consulting in Washington.

After touching its highest level in nearly three weeks earlier in the session, the U.S. dollar fell against a basket of rival currencies, after the business council news and the Fed minutes.

The dollar index (.DXY) fell 0.36 percent, with the euro (EUR=) up 0.27 percent to $1.1765.

U.S. Treasury yields were lower in late trading after the Fed minutes and were still near session lows reached earlier in the day as investors increased bids for government debt on the Washington news.

Benchmark 10-year notes last rose 11/32 in price to yield 2.229 percent, from 2.266 percent late on Tuesday.

The 30-year bond last rose 18/32 in price to yield 2.8127 percent, from 2.84 percent late on Tuesday.

Oil prices fell more than 1 percent on Wednesday even though U.S. crude stockpiles declined by the most in a year, as data suggesting domestic production was edging higher stoked worries about the global crude glut.

U.S. crude (CLcv1) fell 1.6 percent to $46.79 per barrel and Brent (LCOcv1) was last at $50.33, down 0.93 percent on the day.

Spot gold (XAU=) reversed course and added 0.8 percent to $1,281.70 an ounce shaking off two days of losses as the dollar fell after the Fed minutes.

Copper (CMCU3) rose 2.09 percent to $6,512.31 a ton.

(Additional reporting by Nigel Stephenson, Saikat Chatterjee, Abhinav Ramnarayan and Helen Reid in London, Wayne Cole in Sydney, by Gertrude Chavez-Dreyfuss in New York, graphics by Nigel Stephenson and Helen Reid; Editing by Gareth Jones and Nick Zieminski)