US stocks struggled to find direction during the trading session on Wednesday, following two jobs data that showed the labor market remains tight amid sticky inflation.
Wall Street awaits further 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 technology-heavy Nasdaq Composite (^IXIC) fell near flatline.
Bond yields inched lower along with a stronger dollar. The yield on the benchmark 10-year US Treasury note dipped to 3.92% on Wednesday morning.
US stocks tumbled on Tuesday after Powell said during testimony before the Senate Banking Committee that interest rates could rise “higher” than expected as the Fed continues a persistent fight against inflation.
Powell’s comments on Capitol Hill triggered a 1.5% sell-off in the shares, according to JP Morgan’s trading desk. Tuesday’s losses saw all sectors lower, with financials and real estate posting the biggest falls of the day.
Treasury yields were higher, with the 2-year yield topping 5%, while the spread between the 10-year and 2-year US Treasury yields reversed for the first time since September 1981. According to To Deutsche Bank strategists, reaching this level indicates that a recession could 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 upcoming rate decisions,” Michael Feroli, chief US economist at JP Morgan, wrote in a note Wednesday morning. tomorrow.
“With January macro data mostly printing on the hawkish side, Friday’s NFP and next Tuesday’s CPI are the most critical catalysts for the Fed’s 25-50bp decision,” Feroli added.
Still, on the economic data side, ADP’s monthly reading on private payroll growth rose by 242,000 in February, above consensus expectations of 200,000. ADP also tracked wage growth for those workers who stayed in their jobs, which slowed to 7.2% last month, the slowest pace of gains in a year.
“There is a trade-off in the labor market right now,” Nela Richardson, chief economist at ADP, said in the news release. “We are seeing strong hiring, which is good for the economy and workers, but wage growth is still quite high. The modest slowdown in wage increases, alone, is unlikely to bring inflation down quickly in the short term”.
Meanwhile, the US monthly international trade deficit widened to $68.3 billion in January, below the consensus deficit of $68.7 billion, as imports rose more than exports, according to the US Bureau of Economic Analysis and the US Census Bureau.
Another highlight on Wednesday morning was the January report on the number of job openings, which grew to 10.82 million, above expectations of 10.54 million, the Bureau of Labor Statistics reported.
The February jobs report to be released on Friday will offer further 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 massive 517,000 jobs.
The unemployment rate is expected to hold steady at 3.4%. Another key takeaway from the reading will be wage growth, with anticipated average hourly earnings up 0.3% monthly and 4.7% in the past year.
In individual stock moves, Occidental Petroleum Corporation (OXY) gained nearly 2% on 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.
Shares of CrowdStrike Holdings, Inc. (CRWD) rose 7% on Wednesday after the security software provider reported fourth-quarter earnings that beat analysts’ expectations and issued stronger guidance for the fiscal first quarter.
Tesla (TSLA) shares fell nearly 2% as Berenberg analyst Adrian Yanoshik cut his rating on the stock from buy to hold, citing that “based on misplaced fears of a price war, it appears to have been accepted by the market,” Yanoshik said.
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Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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