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U.S. stocks wavered on Wednesday, following two job prints that showed the labor market remains tight amid sticky inflation.
Wall Street also heard from Federal Reserve Chair Jerome Powell before the House Financial Services Committee Wednesday morning. Powell continued to stress that “no decision” has been made on the size of the interest-rate increase ahead of the March meeting.
“When say we will look at totality of data that will include these next reports. We will carefully analyze. Haven’t made a decision on March meeting. Larger point is that we are not on a preset path,” said Powell during his second day of testimony before Congress.
At noon, the S&P 500 (^GSPC) ticked up by 0.2%, while the Dow Jones Industrial Average (^DJI) ticked down by 0.1%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) rose 0.5%.
Bond yields inched lower alongside a stronger dollar. The yield on the benchmark 10-year U.S. Treasury note ticked down to 3.95% Wednesday midday.
U.S. stocks plummeted Tuesday after Powell said during his Senate Banking Committee testimony that interest rates may rise “higher” than previously expected as the Fed continues a persistent fight against inflation.
Powell’s comments on Capitol Hill triggered a 1.5% selloff in equities, according to JP Morgan’s trading desk. Tuesday’s losses saw every sector lower, with financials and real estate logging the biggest declines for the day.
Treasury yields were higher, with the 2-year yield tipping above 5%, while the spread between the 10-year and 2-year US Treasury yields inverted for the first time since September 1981. According to strategists at Deutsche Bank, reaching this level signals a recession could be underway or has occurred within a maximum of eight months.
“Powell’s speech indicates that the Fed will heavily depend on near-term data for upcoming rates decisions,” Michael Feroli, Chief U.S. Economist at JP Morgan, wrote in a note Wednesday morning.
“With January’s macro data mostly printing on the hawkish side, NFP Friday and CPI next Tuesday are the most critical catalysts for Fed’s decision between 25bp and 50bp,” Feroli added.
Still, on the economic data side, ADP’s monthly read on private payroll growth rose by 242,000 in February, above consensus expectations for 200,000. ADP also tracked pay growth for those workers who stayed in their position, which decelerated to 7.2% last month, the slowest pace of gains within in the last year.
“There is a tradeoff in the labor market right now,” said Nela Richardson, chief economist, ADP, wrote in the press release. “We’re seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated. The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near-term.”
Meanwhile, the U.S. monthly international trade deficit increased to $68.3 billion in January, below the consensus deficit of $68.7 billion as imports increased more than exports, according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau.
Another highlight Wednesday morning was the January’s report on the number of job openings, which fell to 10.82 million, down from the upwardly revised 11.2 million openings in the prior month, the Bureau of Labor Statistics reported. Construction, leisure, hospitality and finance industries showed the major pullbacks in job openings.
“While the January JOLTS report shows job openings are heading in the right direction for the Fed, the decline is far too modest to convince that labor market conditions are cooling enough to bring down inflation,” Matthew Martin, U.S. economist at Oxford Economics, wrote in a statement following the release.
February’s jobs report out on Friday will hold more clues about the strength of the economy. Economists expect 215,000 new jobs will be added to the economy, a slower pace from the January’s blowout number of 517,000 job additions.
The unemployment rate is expected to hold steady at 3.4%. Another key point from the reading will be wage growth, with a 0.3% month-to-month bump in average hourly earnings anticipated and 4.7% over the last year.
In single-stock moves, Occidental Petroleum Corporation (OXY) gained nearly 2% Wednesday morning after a regulatory filing revealed that Warren Buffet’s Berkshire Hathaway bought nearly 6 million shares of the oil company in recent days, raising its stake in the company to 200.2 million shares worth $12.2 billion.
CrowdStrike Holdings, Inc. (CRWD) shares rose 7% Wednesday after the security software provider reported fourth-quarter earnings that topped analysts expectations and issued stronger guidance for the fiscal first quarter.
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