Stocks down, dollar up on Fed minutes

Central bank seems concerned inflation could miss targets.

U.S. stocks erased gains to end lower for a second day, while the dollar jumped with Treasury yields on speculation that the pickup in inflation signaled by data since the Federal Reserve’s last meeting will force a faster tightening.

The catalyst for the lateday sell-off was Fed meeting minutes that painted the picture of a central bank increasingly confident that economic growth will pick up steam but still concerned inflation could miss targets. The initial reaction saw stocks jump with bonds, while the dollar fell.

Assets reversed course as investors pointed to economic data subsequent to the gathering that upend the idea of lagging inflation. The S&P 500 index erased a gain that topped 1 percent to finish at a oneweek low and Bloomberg’s dollar index climbed a fourth day. The 10-year Treasury yield rose to 2.94 percent.

“What we’re seeing on the committee on the growth side is consistent with the fact that there’s clear upside risks to the forecast that they have embedded from December,” James McCann, senior global economist at Aberdeen Standard Investments, said by phone.

When officials next convene March 20, they will consider for the first time a January jobs report that indicated rising wages and consumer prices that surged faster than forecast last month, two data points that belie their concern that inflation will lag.

Investors have also been watching a deluge of Treasury sales that are slated to put $258 billion up for auction this week. Surging rates gave impetus to one of the steepest equity sell-offs in years two weeks ago. While investors seem to have adjusted to 10-year yields at a four-year high for now, the rush of fresh debt could push them higher.