S&P 500 ends slightly higher ahead of Powell testimony, upcoming data

Today’s session was described as “a holding pattern” since all the indexes ended more or less even, but the numbers tell a different story with all the indexes up in the morning, the Dow up some 200 points, and then everything started declining right about noon. It was likely around noon that investors began reacting to Saturday’s comments by San Francisco Fed Prez Mary Daly, “if inflation and labor market data continue to come in hotter than expected, interest rates would need to go higher.”  

So the markets anxiously await Friday’s payrolls report, worried that employment and payrolls will continue to be high.  Powell will also be providing more clues when he testifies before Congress Tuesday and Wednesday. Volume is still below average at 10.6 billion.  Check out the graph showing the correlation for the past year between the S&P and the 2-year Treasury note. 

Mon  March 6, 2023  5:41 PM

S&P 500 ends slightly higher ahead of Powell testimony, upcoming data

By Sinéad Carew and Bansari Mayur Kamdar

DJ: 33,390.97  +387.40        NAS: 11,689.01  +226.02       S&P: 4,045.64  +64.29     3/3

DJ: 33,431.44  +40.47          NAS: 11,675.74  -13.27          S&P: 4,048.42  +2.78       3/6

March 6 (Reuters) - The S&P 500 made little progress on Monday, closing slightly higher than its session low as U.S. Treasury yields pulled higher with investors braced for this week's testimony from Federal Reserve Chair Jerome Powell and the February jobs report.  Earlier in the session the indexes looked much stronger with the Nasdaq (.IXIC) up more than 1% at one point before gradually losing its gains. The biggest boost had come from iPhone maker Apple Inc (AAPL.O) after Goldman Sachs initiated coverage with a "buy" rating.  But equities gave up earlier gains as yields on U.S. 10-year Treasury notes and the 2-year Treasuries yield came back from an early declines after data showed new orders for U.S.-manufactured goods fell less than expected in January.  Rising bond yields tend to weigh on equity valuations, particularly those of growth and technology stocks, as higher rates reduce the value of future cash flows.

    Reuters Graphics

"The market is in a holding pattern because this week will be key to shedding light on what's going on with the U.S. economy," said Irene Tunkel, chief U.S. equity strategist for  BCA Research in New York who will keep a close watch on February's U.S. non-farm payrolls report, due out Friday.  "People are worried about the jobs number and the economic data because they're worried about what the Fed will do. Ultimately all roads lead to the Fed."  And with potential Fed rate hikes their key concern, Monday's data had already dampened investor enthusiasm, said Shawn Cruz, head trading strategist at TD Ameritrade in Chicago.  "The market pullback was because there is still a lot of work to do on inflation," said Cruz. "We're not seeing the type of demand slowdown we need to see. The whole point of the Fed hiking rates is to slow down the economy."

According to preliminary data, the S&P 500 (.SPX) gained 2.72 points, or 0.07%, to end at 4,048.36 points, while the Nasdaq Composite (.IXIC) lost 12.59 points, or 0.11%, to 11,676.41. The Dow Jones Industrial Average (.DJI) rose 38.69 points, or 0.12%, to 33,429.66.  The commodity-linked materials sector (.SPLRCM) was weak on Monday after China set a lower-than-expected target for economic growth this year at around 5%.

The three main U.S. stock indexes had rallied on Friday and notched weekly gains after comments from Fed policymakers calmed jitters around aggressive rate hikes.  But San Francisco Federal Reserve Bank President Mary Daly said on Saturday that if inflation and labor market data continue to come in hotter than expected, interest rates would need to go higher and stay there longer than Fed policymakers had projected in December.  Investors will look for clues about the Fed's future rate hiking path when Powell testifies before Congress on Tuesday and Wednesday. Since Powell last spoke strong economic data and hotter than expected inflation have raised concerns the Fed will raise rates higher than expected or keep them higher for longer.  Traders expect at least three more 25-basis-point hikes this year and see interest rates peaking at 5.44% by September from 4.67% now.

Shares of cryptocurrency-related companies were volatile after Silvergate Capital Corp (SI.N) pulled the plug on its crypto payments network and raised doubts about the company's ability to stay in business.