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Stocks end choppy session higher after Fed minutes reaffirm pledge on inflation

U.S. stocks pushed higher Wednesday afternoon to close out a choppy day in the green, though the risk of a recession remained top of mind for many investors.

The S&P 500 rose for a third straight session, closing higher by 0.4% to end at 3,845.08. The Dow Jones Industrial Average gained 70 points, or 0.2%, to end at 31,037.68, and the Nasdaq Composite gained 0.4% to reach 11,361.85.

The moves came after minutes from the Federal Reserve reaffirmed the central bank remained focused on tightening monetary policy as needed to bring down inflation.

"Participants concurred that the economic outlook warranted moving to a restrictive stance of policy," minutes from the central bank's June meeting stated, "and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist."

Earlier on Wednesday, new data painted a mixed picture on the current state of the economy. Job openings came in greater-than-expected at nearly 11.3 million for May, pointing to persistent tightness in the labor market and ongoing labor scarcities relative to vacancies. Separately, the Institute for Supply Management's closely watched services index dipped to the lowest level since May 2020 as of June, with service-sector employment and new orders each especially weakening during the month.

Crude oil prices held below $100 per barrel after falling below that threshold for the first time since mid-May on Tuesday as investors increasingly bet that a downturn might weigh on demand for energy. Bitcoin prices rose back above $20,000. Treasury yields climbed across much of the curve, and the benchmark 10-year yield edged back above 2.9%.

Prospects of a deep economic downturn have stoked ongoing volatility in markets, with investors weighing whether inflation and a more aggressive Federal Reserve tightening cycle will curb growth to the point of tipping the economy into a recession. And some key economic data, from consumer sentiment to spending and purchasing managers' indices, have each softened or turned lower in recent prints.

"A broad-based slowdown in overall consumer spending has already been underway this year, led by deterioration in the goods category, with services providing little in the way of offset," Barclays' Jonathan Miller wrote in a recent note. And as sentiment indexes from the Conference Board's Consumer Confidence Index to University of Michigan Surveys of Consumers decline, he added, that "may indicate that a more precautionary mindset might be setting in, which would make households more inclined to hoard excess savings accumulated during the pandemic."

Whether — and if so, when and how deeply — a recession takes hold has become a key question for market watchers and has left the stock market languishing in a bear market.

"For the last several months, the market's been watching the economy choke on inflation," Matt Kishlansky, GenTrust Head of Asset Allocation, told Yahoo Finance Live. "There's really no consensus between the stock market and the bond market as to what we do in the interim and where we're headed."

In the bond market, the 10-year Treasury yield has slid from a more than decade high of over 3.4% in mid-June to near 2.9%. And Fed Funds futures have shown investors are now pricing in a lower terminal rate for the Federal Reserve — or the rate at which the Fed will stop hiking short-term interest rates — than they were just a couple weeks ago.

"So if you try to reconcile those two numbers, the bond market's telling you that before the ink is even dry on the last interest rate hike, the Federal Reserve is going to have to start cutting rates in order to deal with the economic fallout from those rate hikes," Kishlansky added. "[The] bond market's, in essence, saying that a recession is a fait accompli at this point. The stock market's not so sure."

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter.

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