Wall Street stocks extended their earlier gains on Wednesday afternoon after minutes from the Federal Reserve’s most recent policy meeting emphasised the US central bank’s desire to tame stubbornly high inflation.

The Fed earlier this month raised its benchmark interest rate by 0.5 percentage points, the largest increase in more than 20 years, and signalled that it would do the same at its next two meetings in an attempt to tame inflation.

Consumer prices in the US rose 8.3 per cent year on year in April, down slightly from the previous month but still close to a 40-year high.

Minutes from the meeting released on Wednesday showed officials had discussed using more aggressive rate rises, but were concerned about the effect it would have on the labour market.

The S&P 500, which dipped into bear market territory last week after a difficult few months for global equities, finished 0.9 per cent higher, rising shortly after the minutes were released, having been up 0.2 per cent beforehand. The technology-heavy Nasdaq Composite rose 1.5 per cent.

Stocks had risen in choppy trading earlier in the day despite a series of disappointing updates on the strength of the manufacturing and retail industries.

Orders for capital goods, an important proxy for the future of US manufacturing output,  edged up 0.4 per cent in April from the previous month, a slowdown from the 0.6 per cent month-on-month rise in March and below economists’ estimates. A core reading that strips out transportation orders, which can skew the data, also missed forecasts, rising 0.3 per cent.

On the corporate front, Dick’s Sporting Goods became the latest US consumer business to cut its earnings outlook, sending its shares down in early trading before they rebounded sharply. This followed a bruising session across equity markets on Tuesday after social media group Snap warned on macroeconomic conditions, and investors took fright over disappointing US housing data and business surveys.

“Markets are telling us that the risks of a recession are rising,” said Mary Nicola, multi-asset portfolio manager at PineBridge Investments.

Still, analysts said stocks were finding some support from rebalancing by funds that needed to buy equities to maintain asset allocation mandates following strong falls in the value of their existing holdings.

The euro lost 0.6 per cent against the dollar to just under $1.07, as a bounce fuelled by European Central Bank president Christine Lagarde signalling the end of negative interest rates in the eurozone faded.

Elsewhere in equity markets, Europe’s regional Stoxx 600 gauge added 0.6 per cent.

Government bond prices picked up slightly for the day, but were little changed after the release of the Fed minutes. The yield on the 10-year Treasury, which falls when prices rise, dipped 0.01 percentage points to 2.76 per cent. The two-year yield, which more closely tracks interest rate expectations, slipped 0.02 percentage points to 2.5 per cent, having risen above 2.8 per cent earlier in the month.

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