S&P 500 barely gains as investors eye upcoming jobs data, rate hikes

Powell merely reiterated today what he said yesterday about the likely necessity of more rate hikes and it again drove the indexes down, the Dow about 200 points until about 2 pm when all the indexes came back for modest gains, the Dow being the only loser. Yesterday’s comments changed the odds for a ½ point rate hike from 30% to 70% and today that went up again now to 80%.  The main trigger was the private payrolls report which came in higher than expected with 300,000 more job openings than expected. Investors will look anxiously towards Friday’s government payrolls report and next week’s inflation readings for more clues about a ¼ vs ½ point rate hike this month.  Volume remains below average at 10.3 billion. 

Wed  March 8, 2023  4:25 PM

S&P 500 barely gains as investors eye upcoming jobs data, rate hikes

By Sinéad Carew and Shristi Achar A

DJ: 32,856.46  -574.98        NAS: 11,530.33  -145.40        S&P: 3,986.37  -62.05      3/7

DJ: 32,798.40  -58.06          NAS: 11,576.00  +45.67         S&P: 3,992.01  +5.64       3/8

March 8 (Reuters) - The S&P 500 index (.SPX) closed slightly higher on Wednesday as investors grappled with mixed messages from Federal Reserve Chair Jerome Powell and U.S. economic data ahead of upcoming labor and inflation reports that are expected to determine the central bank's future rate hiking path.  In his second day of testimony to Congress on Wednesday, Powell reaffirmed his message from Tuesday, of higher and potentially faster interest rate hikes, but said that debate was still underway with a decision hinging on data to be issued before the U.S. central bank's policy meeting in two weeks.

Stocks had fallen more than 1% on Tuesday after Powell's comments led investors to dramatically increase expectations for a 50-basis-point hike in March, with the majority of investors expecting a 25-basis-point hike before Powell spoke.  Data released on Wednesday did little to ease concerns about higher rates as it showed that U.S. private payrolls increased more than expected in February.  Also, the U.S. jobs report showed openings decreased to 10.8 million in January compared with economists' expectations for 10.5 million, and data for the prior month was revised higher. Layoffs rose in January and 2022 job cuts were higher than initially thought while fewer people quit their jobs.  "Investors are digesting Fed Chair Powell's testimony to Congress and data indicating that the job market remains pretty hot," said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management, in Minneapolis.

Hainlin sees Friday's non-farm payroll report and next week's inflation readings for February as keys to whether the next rate hike will be 25 or 50 basis points.  Traders kept increasing bets for a Fed rate hike of 50 basis points later this month, with fed funds futures recently showing a roughly 80% chance for such a hike, up from about 70% on Tuesday and 31% on Monday before Powell's first testimony, according to CME Group's FedWatch tool. 

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Dow Jones Industrial Average (.DJI) had fallen 58.06 points, or 0.18%, to 32,798.4; the S&P 500 (.SPX) closed up 5.64 points, or 0.14%, at 3,992.01; and the Nasdaq Composite (.IXIC) added 45.67 points, or 0.4%, to end at 11,576.00.

Tesla Inc (TSLA.O) slid after the U.S. auto safety regulator said it was opening a preliminary investigation into 120,000 Model Y 2023 vehicles following reports about steering wheels falling off while driving.  Occidental Petroleum Corp (OXY.N) gained after Warren Buffett's Berkshire Hathaway Inc (BRKa.N) increased its stake in the oil company to about 22.2%. 

Declining issues outnumbered advancers on the NYSE by a 1.02-to-1 ratio; on Nasdaq, a 1.14-to-1 ratio favored decliners.  The S&P 500 posted two new 52-week highs and 11 new lows; the Nasdaq Composite recorded 48 new highs and 170 new lows.

On U.S. exchanges 10.3 billion shares changed hands compared with the 10.90 billion average for the last 20 sessions.