U.S. stocks edged lower Wednesday as investors parsed a second day of congressional testimony from Federal Reserve Chair
and considered another signal of a hot labor market.
The S&P 500 was down 0.2% in afternoon trading, while the Dow Jones Industrial Average slipped 0.6%. The Nasdaq Composite fell less than 0.1%.
Stocks fell Tuesday after Mr. Powell said the Fed is prepared to speed up the pace of interest-rate increases if inflation and the labor market don’t cool down. The global economy has shown signs of resilience in recent weeks. The S&P 500 lost 1.5% and markets moved to price in a higher probability of a bigger rise in rates at the central bank’s next meeting.
“There’s this growing concern about a ‘no landing’ scenario, effectively where it turns out that the Fed and other central banks have just not done anywhere near enough” to temper economic growth and curb inflation, said John Roe, head of multiasset funds at Legal & General Investment Management.
In his second session of testimony to Congress, Mr. Powell said Wednesday the central bank was keeping its options open about future rate increases and that coming economic data would strongly influence the rate decision at the Fed’s March 21-22 meeting.
The U.S. 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 labor market. A second readout, the JOLTS report on job openings, also came in higher than expected despite elevated layoffs in the technology sector.
The most important near-term indicator for gauging the health of the jobs market will be Friday’s nonfarm payrolls report, but Wednesday’s releases will also be scrutinized, investors said.
“We’re in an environment where every data point can cause volatility,” said Karim Chedid, an investment strategist at BlackRock.
In bond markets, yields on shorter-dated Treasurys were poised to set new multiyear highs, as investors braced for higher Fed rates. The 2-year yield edged higher to 5.062% after settling Tuesday at 5.011%, its highest closing level since June 2007. Bond yields rise as prices fall.
The yield on the benchmark 10-year Treasury note reversed earlier declines and recently stood at 3.988%, up from 3.974% Tuesday.
Bond-market moves in recent weeks have meant that the inversion of the yield curve—in which shorter-dated bonds yield more than longer-dated ones—deepened. Such inversions are often viewed as an indicator of a possible recession.
On Tuesday, two-year yields exceeded 10-year yields by more than a percentage point for the first time since 1981. The move also indicated that investors believe that interest rates will rise higher than previously expected over the coming months.
“I think we will probably see half-point rate hikes and the market is already prepared for that,” said Christian Hoffmann, portfolio manager at Thornburg Investment Management, which manages $42 billion in client assets.
Among individual stocks,
rose 2.3% after the cybersecurity company gave a revenue outlook that came well above analysts’ forecasts. Online clothing and styling company
dropped 10% after it said losses more than doubled last quarter.
gained 1.9% after the soup and snack maker reported a 12% rise in sales.
Overseas, the Stoxx Europe 600 edged up less than 0.1%.
rose 2.1% after the sportswear company cut its dividend, as it contends with lower sales in China and a $6 billion mountain of unsold products. Shares in
the German auto-parts supplier, rose 7.6% after it said it expects higher sales and earnings this year.
In Asia, the Shanghai Composite Index finished the day little changed, and Hong Kong’s Hang Seng Index fell 2.4%. Japan’s Nikkei 225 rose 0.5%.
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