Stock Market Today: Fed Minutes Make for a Choppy Session

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Some mixed economic data and the release of the minutes from the last meeting of the Federal Reserve's rate-setting committee made for a volatile session on Wednesday.

The major indexes overcame some early stumbles to trade higher for most of the day – but then reversed course after it became clear that the central bank has no interest in cutting interest rates anytime soon.

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Market participants had plenty of economic data to digest even before the Fed minutes landed at 2 p.m. Eastern Time. Among the most important news was a report that U.S. manufacturing activity contracted for a second month in December. The Institute for Supply Management's gauge of factory activity fell to 48.4 last month – the lowest reading since the COVID-19 month of May 2020 – from 49 in November.

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Readings below 50 indicate contraction. With ISM's December figure now in the books, 2022 represented the steepest annual drop in manufacturing activity since the Great Financial Crisis year of 2008.

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The factory data confirm "fading global goods demand and falling production," wrote Jonathan Millar, senior U.S. economist at Barclays Investment Bank. "December's composite reflects intensifying contractions in new orders and supplier delivery times, as well as the production index dropping into contractionary territory."

Markets shrugged off the data to trade higher. But the release of the Fed meeting minutes (in which officials affirmed their hawkish stance on inflation) led to a pullback.

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"The tone [of the minutes] was hawkish, but not more so than anticipated," wrote Ian Lyngen, head of U.S. Rates Strategy at BMO Capital Markets, in a note to clients. "It was encouraging to see the Fed acknowledge the risks of the market easing financial conditions while the FOMC is actively attempting to tighten further."

Happily, markets managed to rebound by the closing bell. The blue-chip Dow Jones Industrial Average added 0.4% to finish at 33,269, while the broader S&P 500 gained 0.8% to close at 3,852. The tech-heavy Nasdaq Composite rose 0.7% to finish at 10,458.

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If nothing else, Wednesday's session was a reminder that volatility is very much carrying over to the new year. Against this backdrop, investors would do well to gird their portfolios with securities that can soften such swings.

Low-volatility ETFs are a great way to add defense and diversification to your holdings, as are select low-volatility stocks. The best bear market stocks and best bear market ETFs will also help do the trick. For those looking for steady and reliable equity income, the best Dow dividend stocks and the best dividend-growth stocks will also stand one in good stead.

But why not take a cue from the greatest long-term investor of all time? Warren Buffett's Berkshire Hathaway (BRK.B) owns dozens of dividend stocks – and Warren Buffett's best dividend stocks are always worth a closer look.

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Dan Burrows is Kiplinger's senior investing writer, having joined the publication full time in 2016.

A long-time financial journalist, Dan is a veteran of MarketWatch, CBS MoneyWatch, SmartMoney, InvestorPlace, DailyFinance and other tier 1 national publications. He has written for The Wall Street Journal, Bloomberg and Consumer Reports and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among many other outlets. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about markets and macroeconomics.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade individual stocks or securities. He is eternally long the U.S equity market, primarily through tax-advantaged accounts.