Wall Street struggles for direction ahead of Powell’s testimony

  • Meta rises as report says job cuts looming
  • Rivian slips on plans to sell bonds worth $1.3 billion
  • US economy to reach technical recession – BofA CEO
  • Indices: Down 0.09%, S&P down 0.04%, Nasdaq up 0.20%

March 7 (Reuters) – U.S. stock indexes were subdued in cautious trade on Tuesday ahead of Federal Reserve Chairman Jerome Powell’s testimony to Congress that could shed more light on the central bank’s rate hike plans.

Powell will testify before the Senate Banking Committee at 10 a.m. ET (1500 GMT), with investors awaiting his comments on the Fed’s moves aimed at bringing inflation toward its 2% target.

Powell said at his last press conference that a “disinflationary process” had begun, while warning that the central bank’s fight against rising prices was not over.

Inflation data since his remarks on February 1 have shown that prices have not fallen as much as analysts had expected, while the labor market has shown signs of resilience.

“We don’t really expect anything new to be shared, he (Powell) will probably remain hawkish. He’ll say we need to be higher for longer and pretty much everything else we’ve heard so far,” said Sam Stovall, investment strategist at CFRA Research, New York.

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The benchmark S&P 500 (.SPX) closed higher for a third straight session on Monday as Treasury yields took a breather from their recent rally fueled by hopes the Fed could keep interest rates higher than many had initially expected the year’s.

The yield on two-year government bonds, which best reflects expectations for short-term interest rates, hit its highest since 2007 at 4.94% last week and has since remained below that level.

Higher bond yields tend to weigh on the valuation of stocks, especially the value of growth and technology stocks, as higher interest rates reduce the value of future cash flows.

Recent economic data and comments from Fed policymakers have traders reassessing the rate, with money market futures pricing in a 28% chance the central bank will raise interest rates by a major 50 basis points in March, according to CME Group’s Fedwatch tool.

Traders see Fed funds rates peaking at 5.46% in September, from the current 4.67%.

“The Street is looking for any indication that the Fed will aim more toward 6%, and that would be a bigger concern … 5.5% has pretty much already been weighed by the market,” Stovall said.

Investors are also awaiting data later this week, which is expected to show nonfarm payrolls rose by 200,000 in February, compared with the much stronger-than-expected 517,000 jobs reported in January.

Bank of America ( BAC.N ) Chief Executive Brian Moynihan said the U.S. economy would reach a technical recession in the third quarter of 2023.

At 9:41 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 28.80 points, or 0.09%, at 33,402.64, the S&P 500 (.SPX) was down 1.44 points, or 0.04%, at 4,046, 98, while Nasdaq. The Composite (.IXIC) added 23.27 points, or 0.20%, to 11,699.01.

Among individual stocks, Rivian Automotive ( RIVN.O ) fell 8.8% after the electric car maker revealed plans to sell $1.3 billion worth of bonds.

Meta Platforms Inc ( META.O ) rose 2.0% after Bloomberg News reported that the company will cut thousands of jobs as soon as this week in a new round of layoffs.

Dick’s Sporting Goods ( DKS.N ) rose 7.5% after the retailer reported annual earnings above Wall Street estimates and more than doubled its quarterly dividend.

Declining issues outnumbered advancing ones by a ratio of 1.09 to 1 on the NYSE. Advancing issues outnumbered decliners by a ratio of 1.05 to 1 on the Nasdaq.

The S&P index posted seven new 52-week highs and one new low, while the Nasdaq posted 20 new highs and 30 new lows.

Reporting by Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru Editing by Vinay Dwivedi

Our standards: Thomson Reuters Trust Principles.

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