By Alexandra Scaggs
U.S. stocks got back on track to extend a two-session winning
streak Wednesday, after a brief turn lower on jitters about the
outlook for Federal Reserve policy.
Stocks initially turned lower, and prices of ultrasafe Treasury
bonds fell, after minutes from the Federal Reserve's latest
policy-setting meeting indicated officials debated whether to raise
rates sooner than expected.
But stocks recouped most of their losses shortly afterward, and
Treasury prices slipped from their session highs. Traders and
strategists said that investors were more likely to brush off the
minutes since Fed Chairwoman Janet Yellen is scheduled to speak
Friday.
"The minutes are backward-looking, and Yellen's speaking
Friday," said Michael Antonelli, sales trader with Robert W. Baird.
"We're just kind of treading water until then."
The Dow Jones Industrial Average recently traded up 59 points,
or 0.3%, to 16978. The S&P 500 index gained five points, or
0.2%, to 1986. Technology stocks lagged, with the Nasdaq Composite
Index flat, gaining less than 0.1% to 4528.
Investors have been keeping a close eye on when the Fed could
raise interest rates, with short-term rates having been held near
zero since December 2008.
"Markets are nervous about what the Fed's [rate hike] is going
to look like," said David Lebovitz, global markets strategist for
J.P. Morgan Funds.
But the stock-market move was relatively muted, as investors
looked ahead to the annual gathering of central bankers in Jackson
Hole, Wyo., where Ms. Yellen and European Central Bank President
Mario Draghi are scheduled to speak later this week.
"That is where the market is directing a lot of its focus," said
Mr. Lebovitz.
The persistently low interest rates have supported stock-market
gains this year by keeping bond yields low and pushing investors to
search for yield in riskier parts of the market.
As a result, "you're getting a lot of people crowded into pretty
small spaces where they think there's opportunity," said Ralph
Segall, chief investment officer of Segall Bryant & Hamill,
which manages $9.5 billion. "This is a time you're worried about
making sure you don't get run over."
Mr. Segall said that U.S. stocks could be vulnerable to a sharp
selloff if investors' hunt for yield changes course when the Fed
signals it will raise rates. As a result, his team has been buying
stocks that trade at relatively low valuations, in hopes those
stocks will hold up if broader stock benchmarks take a dive.
Stocks in the U.S. and Europe have recently staged a recovery
from a mid-July pullback, which was sparked by a bout of
geopolitical fears and concerns about the end of the Fed's loose
monetary policy. As of Tuesday's close, the Dow was off 1.3% from
its July 16 record and the S&P was just 0.3% below its July 24
record.
European stocks fell, with the Stoxx Europe 600 Index down
0.1%.
In corporate news, Home Depot led the Dow higher, gaining 3%.
That advance came on the back of Tuesday's 5.6% gain on strong
second-quarter earnings and upbeat housing-market data. Its
competitor Lowe's rose 1.9% after reporting strong second-quarter
results but lowering its sales outlook for the year.
PetSmart Inc. said it would explore strategic alternatives,
including a possible sale. The company said it would implement a
cost-reduction program. Shares rose 1.1%.
In commodity markets, crude-oil futures rose 0.6% to $93.38 a
barrel. Gold futures slipped 0.4% to $1,291.60 an ounce.
Write to Alexandra Scaggs at alexandra.scaggs@wsj.com