Stocks Wobble as Jerome Powell Returns to Congress

US stocks swung between gains and small losses on Wednesday as investors analyzed the second day of Congressional testimony from Federal Reserve Chairman Jerome Powell and further data suggesting the labor market remains hot.

The S&P 500 climbed 5.64 points, or 0.1%, to 3,992.01, while the Nasdaq Composite rose 45.67 points, or 0.4%, to 11,576.00. The Dow Jones Industrial Average fell 58.06 points, or 0.2%, to 32,798.40.

Mr Powell said the central bank would keep its options open for future rate hikes and that future economic data would strongly influence the rate decision at the Fed’s March 21-22 meeting.

Stocks also fell on Tuesday when he said the Fed is prepared to accelerate the pace of interest rate hikes if inflation and the labor market do not ease. Markets moved higher amid a higher probability of a bigger rate hike at the central bank’s next meeting.

“There is this growing concern about a ‘no tapering’ scenario, effectively one where the Fed and other central banks simply haven’t done enough” to moderate economic growth and curb inflation, John Roe said. , head of highly active funds in Legal and General Investment Management.

The global economy has shown signs of resilience in recent weeks.

The US private sector added 242,000 jobs in February, according to the ADP employment report. That came in above economists’ forecasts, another sign of an unexpectedly strong job market. A second reading, the JOLTS report on job openings, also came in higher than expected, despite high layoffs in the technology sector.

The most important near-term indicator for assessing the health of the labor market will be Friday’s nonfarm payrolls report.

“We are in an environment where any data point can cause volatility,” said Karim Chedid, an investment strategist at BlackRock.

In bond markets, yields on shorter-dated Treasuries settled at multi-year highs as investors braced for higher Fed rates. The two-year yield rose to 5.064%, its highest closing level since June 2007, from 5.011% on Tuesday. Bond yields rise as prices fall.

The yield on the benchmark 10-year Treasury note reversed earlier declines and was unchanged from 3.974% on Tuesday.

The moves in the bond market in recent weeks have meant that the inversion of the yield curve – in which shorter-dated bonds yield more than longer-dated ones – has deepened. Such reversals are often seen as an indicator of a possible recession.

Stocks sold off on Tuesday after comments from Federal Reserve Chairman Jerome Powell. Photo: BRENDAN MCDERMID/REUTERS

Earlier this week, two-year yields surpassed 10-year yields by more than a percentage point for the first time since 1981. The move also shows investors believe interest rates will rise higher than expected before during the next few months.

“I think we’ll probably see a half-point rate hike, and the market is already prepared for that,” said Christian Hoffmann, portfolio manager at Thornburg Investment Management, which manages $42 billion in client assets.

Some investors are turning to cash and short-term Treasuries to seek income. Brian Vendig, president of MJP Wealth Advisors, which manages about $1 billion in assets, said he has added to the main money market funds, short-term Treasuries and certificates of deposit for clients.

“If you can hide in cash and get competitive yields because you’re looking for principal protection or you know there’s an expense coming over the next 12 months, it makes sense to do that in this environment,” Mr. Place.

Among individual stocks, CrowdStrike rose $3.99, or 3.2%, to $128.92 after the cybersecurity company gave a revenue outlook that was well above analysts’ forecasts. Online clothing and styling company Stitch Fix fell 2 cents, or 0.4%, to $4.95 after it said losses doubled last quarter. Campbell Soup gained $1.01, or 1.9%, to $53.14 after the soup and snack maker reported a 12% increase in sales.

Federal Reserve Chairman Jerome Powell told the Senate Banking Committee on Tuesday that returning inflation to the central bank’s 2% target has “a long way to go and it’s likely to be bumpy.” Photo: Al Drago/Bloomberg

Overseas, the Stoxx Europe 600 rose less than 0.1%. In Asia, the Shanghai Composite Index ended the day little changed and Hong Kong’s Hang Seng Index fell 2.4%. Japan’s Nikkei 225 rose 0.5%.

Write to Anna Hirtenstein at [email protected] and Vicky Ge Huang at [email protected]

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