US stocks teetered between small gains and losses on Wednesday as investors analyzed a second day of congressional testimony from Federal Reserve Chairman Jerome Powell and further 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 fell 58.06 points, or 0.2%, to 32798.40.
Mr. Powell said the central bank would keep its options open about future rate hikes and that upcoming economic data would heavily influence the rate decision at the Fed’s March 21-22 meeting.
Stocks also fell on Tuesday as he said the Fed is willing to accelerate the pace of rate hikes if inflation and the labor market don’t cool. Markets went to price on a higher probability of a bigger interest rate hike at the next central bank meeting.
“There is growing concern about a ‘no landing’ scenario, basically when it turns out that the Fed and other central banks have done nowhere near enough to dampen economic growth and curb inflation,” said John Roe. , Head of Multi-Asset Funds in Legal and General Asset Management.
The global economy has shown signs of resilience in recent weeks.
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 job vacancies report, also came in higher than expected, despite the high number of layoffs in the technology sector.
The most important near-term indicator for gauging the health of the job market will be Friday’s nonfarm payroll report.
“We are in an environment where any data point can create volatility,” said Karim Chedid, an investment strategist at BlackRock.
In bond markets, yields on shorter-term government bonds stabilized at new multi-year highs as investors braced for higher interest rates from the Fed. Two-year yields rose slightly to 5.064%, the highest closing level since June 2007, from 5.011% on Tuesday. Bond yields rise when prices fall.
The yield on the benchmark 10-year Treasury bill reversed previous declines and was unchanged from 3.974% on Tuesday.
Movements in the bond market in recent weeks have caused the yield curve inversion – with shorter-dated bonds yielding more than longer-dated bonds – to deepen. Such inversions are often seen as an indicator of a possible recession.
Earlier this week, the two-year rate surpassed the 10-year rate by more than a percentage point for the first time since 1981. The move also indicates that investors believe interest rates will rise more than previously expected in the coming months.
“I think we will probably see rate hikes of half a point 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-dated government bonds to seek income. Brian Vendig, president of MJP Wealth Advisors, which manages about $1 billion in assets, said he added money market funds, short-term treasuries and certificates of deposit for clients.
“If you can hide in cash and get competitive returns because you’re looking to protect principal or you know there will be expenses in the next 12 months, then it makes sense to do so in this environment,” said Mr. Vendig.
Among individual stocks, CrowdStrike rose $3.99, or 3.2%, to $128.92 after the cybersecurity firm issued revenue guidance that far exceeded analysts’ forecasts. Online clothing and styling company Stitch Fix fell 2 cents, or 0.4%, to $4.95 after it said losses more than 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.
Abroad, the Stoxx Europe 600 rose less than 0.1%. In Asia, the Shanghai Composite Index ended the day little changed and the Hong Kong Hang Seng Index fell 2.4%. Japan’s Nikkei 225 rose 0.5%.
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