Fed minutes: Officials back reducing bond holdings this year

However, they chose not to vote for a rise because of the Fed's policy of raising rates gradually, and because recent communications had not pointed to an increase.

Federal funds futures implied traders saw about a 46 percent chance the US central bank would raise rates twice more by year-end, down from roughly 50 percent late on Tuesday, according to CME Group's FedWatch program.

The U.S. dollar pulled away from recent 6-1/2 month lows, as the release of President Donald Trump's budget proposal raised hopes that his administration's policies would move forward.

On the economic front, existing home sales fell 2.3% in April, coming in below expectations (http://www.marketwatch.com/story/existing-home-sales-stall-in-april-as-tight-supply-pushes-properties-to-record-low-time-on-the-market-2017-05-24) as lean inventory constrained demand.

Nvidia rose 2.8 percent to $140.80 on a report that SoftBank has built a $4 billion stake in the chipmaker. The two were the biggest losers on the S&P.

Assuming the economy continues to perform as expected, with continued job and wage growth leading to a rebound in consumer spending and business investment, "most participants judged.it would soon be appropriate" to raise rates again, the minutes stated.

The yield gap between two-year and 10-year Treasuries shrank over 1 basis point to 96 basis points, not far above the level last seen on Oct (Shenzhen: 000069.SZ - news). 27.

But Boris Schlossberg of BK Asset Management, said: "The Fed cast a doubt on even the possiblity of a June rate hike".

U.S. Treasury yields fell on Wednesday on investor relief after the Federal Reserve signaled a gradual approach on raising interest rates and winding down of its massive $4.5 trillion worth bond holdings.

The greenback fell against the euro and the yen. "At the margins, that lowers the odds of a June rate hike" a little, he says.

Elsewhere, world stock markets recovered from initial losses after Moody's Investors Service issued its first credit downgrade of China in 30 years, dropping China's sovereign debt to A1 from Aa3.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.1 percent despite modest gains on Wall Street overnight.

Asian markets closed higher: Tokyo's Nikkei added 0.7 per cent, Hong Kong's Hang Seng rose 0.1 per cent, and China's Shanghai Composite gained 0.1 per cent. China's massive debt been at the center of concerns among economists and Beijing in recent months, and has roiled global financial markets since late a year ago.

Oil prices retreated slightly Wednesday as investors reacted to a smaller-than-expected USA gasoline stocks draw as they awaited the outcome of discussions in Vienna between OPEC and other oil-exporting countries on whether to extend output cuts. ​ Benchmark Brent crude oil was down 39 cents a barrel to $53.76 by 11:56 a.m. EDT (1556 GMT).

Benchmark Brent crude oil rose 55 cents a barrel, or 1.0 percent, to $54.51. Investors waited for news from Vienna, where ministers from the Organization of the Petroleum Exporting Countries and other nations were discussing whether to extend production cuts into the first quarter of 2018.

  • Zachary Reyes