Stocks End the Day in an Ugly Way. The Drop Was the Second in a Row.

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Stocks sold off Wednesday after the release of the minutes of the Federal Reserves July meeting.

The Dow Jones Industrial Average dropped 383 points, or 1.1%, while the S&P 500 fell 1.1%. The Nasdaq Composite declined 0.9%. All three finished near their lows of the day.

Fed governors have been dropping hints in recent weeks that the beginning of the end of the central banks bond buying was nearing, and the minutes confirmed that tapering is at hand. Most participants noted that it could be appropriate to start reducing the pace of asset purchases this year, the minutes read.

The assessment comes as the economy has recovered quickly, and reflects that the Fed is now focused on whenand how quicklyto remove support from the economy.

The selloff was broad. About 83% of S&P 500 stocks fell on the day, according to FactSet. This dynamics often reflects concern about how the market will perform without the Fed there to support it.

Now, its just a question of when tapering will begin. It is going to be September or December, said Dave Wagner, portfolio manager and analyst at Aptus Capital Advisors. Everyone is focusing on Jackson Hole in my opinion, he continued, referring to the conclave of central bankers that occurs later this month in Jackson Hole, Wyo.

Strangely, the bond market didnt react all that much, with the 10-year Treasury yield closing at 1.27%, where it hovered for most of the day. The 2-year yield, which often moves higher when market participants see the Fed hiking short-term interest rates sooner, ended at 0.21%, lower than the 0.22% it hit in the morning.

I dont think weve learned anything new, said Tom Graff, head of fixed income at Brown Advisory. Graff added that the consensus for a short-term interest rate hikes in 2022 or 2023 hasnt changed.

A weak market, however, couldnt keep some stocks down. For some, it was about earnings. Lowes (ticker: LOW) stock rose 9.6% afterreporting a profitof $4.25 a share, beating estimates of $4.01 a share, on sales of $27.6 billion, above expectations for $26.9 billion. TJX( TJX ) stock rose 6% after reportinga profitof 64 cents a share, beating estimates of 59 cents a share, on sales of $12.1 billion, above expectations for $11 billion.

Others were buoyed by analyst upgrades, with ViacomCBS (VIAC) stock rose 3.7% after getting upgraded to Overweight from Equal Weight at Wells Fargo, and BlackBerry (BB) stock gained 4.2% after getting upgraded to Hold from Sell atCanaccord Genuity.

Tilray (TLRY) stock rose 1.5% after the company bought senior secured convertible notes in marijuana company MedMen Enterprises. The notes would convert into an equity stake ifcannabis is legalized in the U.S.

Write to Jacob Sonenshine at jacob.sonenshine@barrons.com

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