US stocks struggled for direction during the trading session on Wednesday, after two employment releases showed the job market remains tight amid steady inflation.
Wall Street is awaiting more testimony from Federal Reserve Chairman Jerome Powell, this time before the House Financial Services Committee.
The S&P 500 (^GSPC) was down 0.1%, while the Dow Jones Industrial Average (^DJI) was down 0.3%. Contracts on the tech-heavy Nasdaq Composite (^IXIC) fell near the flat line.
Bond yields fell along with the strong dollar. The yield on the 10-year US Treasury fell to 3.92% on Wednesday morning.
Federal Reserve Chairman Jerome Powell told the House Financial Services Committee on Wednesday morning: “When we say we’ll look at the totality of data that will include these next reports. We’ll analyze it carefully. We haven’t made a decision about the March meeting.
US stocks fell on Tuesday after Powell said during testimony to the Senate Banking Committee that interest rates may rise “higher” than previously expected as the Federal Reserve continues its ongoing fight against inflation.
Powell’s comments on Capitol Hill led to a sell-off of 1.5% in the stock, according to the trading desk at JPMorgan. Tuesday’s losses saw every sector decline, with the financials and real estate sectors posting the biggest declines for the day.
Treasury yields were higher, with the 2-year yield rising above 5%, while the spread between the 10- and 2-year US Treasury yields flipped for the first time since September 1981. According to Deutsche Bank strategists, it has reached that level. . It indicates that a recession may be underway or has occurred within a maximum of eight months.
“Powell’s speech indicates that the Fed will rely heavily on near-term data for its upcoming interest rate decisions,” Michael Feroli, chief US economist at JP Morgan, wrote in a note Wednesday morning.
“With January’s macroeconomic data mostly on the optimistic side, Friday’s nonfarm payrolls and next Tuesday’s CPI are the most important catalysts for the Fed’s 25bp-50bp decision,” Feroli added.
However, on the economic data side, ADP’s monthly reading of private payroll growth rose by 242K in February, above expectations of 200K. The ADP also tracked pay growth for stay-at-home workers, which slowed to 7.2% last month, the slowest pace of gains in the past year.
“There is a trade-off in the labor market right now,” said Nella Richardson, chief economist at ADP. wrote in a press release. “We are seeing strong hiring, which is good for the economy and workers, but wage growth remains fairly high. A modest slowdown in wage increases is unlikely, on its own, to bring down inflation quickly in the near term.”
Meanwhile, the US monthly international trade deficit rose to $68.3 billion in January, below the consensus deficit of $68.7 billion as imports outnumbered exports. According to the US Bureau of Economic Analysis and the US Census Bureau.
Another highlight Wednesday morning was the January report on the number of job vacancies, which fell to 10.82 million, down from the upwardly revised 11.2 million jobs a month earlier, The Bureau of Labor Statistics reported. The construction, entertainment, hospitality and finance industries showed significant declines in employment opportunities.
Matthew Martin, US economist at Oxford Economics, writes, “While the January JOLTS report shows jobs heading in the right direction for the Fed, the pullback is too modest to persuade labor market conditions to calm enough to bring down inflation.” In a post-release statement.
The February jobs report on Friday will provide more clues about the strength of the economy. Economists expect 215,000 new jobs to be added to the economy, a slower pace than January’s blowout number of 517,000 additional jobs.
The unemployment rate is expected to stabilize at 3.4%. Another key takeaway from the reading will be wage growth, with a 0.3% monthly rise in expected average hourly earnings and 4.7% over the past year.
In individual stock movements, Occidental Petroleum (OXY) gained nearly 2% Wednesday morning after Regulatory filing statement Warren Buffet’s Berkshire Hathaway has bought nearly 6 million shares of the oil company in recent days, increasing its stake in the company to 200.2 million shares worth $12.2 billion.
Shares of CrowdStrike Holdings, Inc. rose. (CRWD) fell 7% on Wednesday after the security software provider reported fourth-quarter earnings that beat analysts’ expectations and issued stronger guidance for the first quarter of the fiscal year.
Shares of Tesla (TSLA) fell nearly 2% as Berenberg analyst Adrian Yanoshik downgraded the stock from Buy to Hold, citing “based on misplaced fears of a price war – it appears to be market-acceptable.”
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Danny Romero is a reporter at Yahoo Finance. Follow her on Twitter @tweet
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