US stocks oscillated between small gains and losses on Wednesday as investors analyzed a second day of congressional testimony from Federal Reserve Chair Jerome Powell and other data suggesting the job market remains hot.
The S&P 500 rose 5.64 points, or 0.1%, to 3992.01, while the Nasdaq Composite rose 45.67 points, or 0.4%, to 11576.00. The Dow Jones Industrial Average slipped 58.06 points, or 0.2%, to 32798.40.
Mr. Powell said the central bank will keep its options open on future rate hikes and that upcoming economic data will heavily influence the rate decision at the Fed’s March 21-22 meeting.
Shares also fell on Tuesday as he said the Fed is ready to accelerate the pace of rate hikes if inflation and jobs don’t cool. Markets priced higher on a higher probability of a major rate hike at the next central bank meeting.
“There’s this growing concern about a ‘no landing’ scenario, where it turns out the Fed and other central banks just haven’t done nearly enough” to dampen economic growth and curb inflation, said John Roe, head of Multi-Asset 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 jobs report. That was above economists’ forecasts, another sign of an unexpectedly strong job market. A second edition, the JOLTS job vacancies report, also came in higher than expected despite increased layoffs in the technology sector.
The key near-term indicator for assessing the health of the labor market will be Friday’s non-farm payrolls report.
“We are in an environment where any data point can cause volatility,” said Karim Chedid, investment strategist at BlackRock.
In bond markets, shorter-dated Treasury yields settled at new multi-year highs as investors braced for higher Fed interest rates. The two-year yield rose to 5.064% from 5.011% on Tuesday, the highest close since June 2007. Bond yields rise when prices fall.
The yield on the benchmark 10-year Treasury note reversed earlier declines and was unchanged from Tuesday’s 3.974%.
The movements in bond markets in recent weeks have caused the yield curve inversion – in which shorter-dated bonds are paying more than longer-dated bonds – to deepen. Such inversions are often seen as an indicator of a possible recession.
Shares sold off on Tuesday following comments from Federal Reserve Chair Jerome Powell.
Photo: BRENDAN MCDERMID/Portal
Earlier this week, two-year yields topped 10-year yields by more than a percentage point for the first time since 1981. The move also shows that investors believe interest rates will rise more than previously expected in the coming months.
“I think we’re probably going to see a half-point rate hike, and the market is already primed 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-dated government bonds in search of income. Brian Vendig, president of MJP Wealth Advisors, which manages about $1 billion in assets, said he has been adding to top-tier money market funds, short-term Treasuries and certificates of deposit for clients.
“If you can hide in cash and earn competitive returns because you’re seeking capital protection or know of an issue coming up in the next 12 months, it makes sense in this environment,” Mr. Vendig said.
Among individual stocks, CrowdStrike rose $3.99, or 3.2%, to $128.92 after the cybersecurity firm issued a revenue forecast that far exceeded analysts’ forecasts. Online clothing and styling company Stitch Fix fell 2 cents, or 0.4%, to $4.95 after losses more than doubled in the most recent 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 Chair Jerome Powell told the Senate Banking Committee on Tuesday that bringing inflation back to the central bank’s 2% target is “a long road and will likely 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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