Did the stock market ‘misinterpret’ Fed again? What strategists say about the reaction to the July minutes

The minutes from the Federal Reserve's meeting in July show that policy makers hiked the benchmark interest rate by 75 basis points.

The minutes of the Federal Open Market Committee's July 26-27 meeting show that Federal Reserve officials agreed that it was necessary to raise their benchmark interest rate to slow the economy.

Fed officials agreed that moving to an appropriately restrictive stance of policy was essential for avoiding an unanchoring of inflation expectations, while some indicated that the policy rate would have to reach a "sufficiently restrictive" level to ensure that inflation is firmly on a path back to 2%.

Many officials were worried that the Fed could tighten the stance of monetary policy more than necessary, according to the minutes.

The US stock market finished lower on Wednesday. The S&P 500 fell 31.16 points to end the day at 4,272. The five-day winning streak for the Dow Jones Industrial Average came to an end as it fell 172.69 points to end at 33,980.32. The index dropped as much as 1.3% to close at 12,938.12

As investors pondered the summary of the meeting, economists at Citigroup argued that the minutes were merely calls to remain data dependent in an uncertain and rapidly evolving environment.

Citi economists Andrew Hollenhorst and Veronica Clark said in a note that the minutes from the July meeting of the Federal Open Market Committee reflected a committee worried they might provide too little restriction to bring down inflation but also concerned they might tighten by too much. Chair Powell will find himself once again making a hawkish push to maintain the'resolve' and 'credibility' in the minutes of the meeting.

The stock-market rally faces a challenge at the S&P 500.

David Petrosinelli is a senior trader at InspereX in New York.

The general market misinterpreted the minutes and that is not the first time. Petrosinelli spoke to MarketWatch on Wednesday. The Fed knows that there is an inflation problem. I think they are aware that they are not near restrictive yet, and I think they will get there.

Morgan Stanley's Mike Wilson warns about the bear market.

The S&P 500 and the Dow Jones Industrial Average experienced renewed upward momentum last week after the S&P 500 exited bear market territory. The market overreacted to Chairman Powell's press conference and economic reports.

I believe we are still in the woods. Andy Tepper, managing director at BNY Mellon Wealth Management, said via phone that a rally in technology was a hopeful sign. There is still some worrisome inflation that the Federal Reserve needs to deal with.