Just minutes ahead of the opening bell, stock futures are suggesting a mixed start to today’s session. In overnight trading, markets in Asia were mixed, and the major European indexes are in the red. Elsewhere, oil prices have ticked higher, with West Texas Intermediate up 0.6%, to around $77.10 a barrel.
With yesterday’s stronger-than-expected report on private payrolls from ADP (Automatic Data Processing), the market’s focus is once again squarely on the Federal Reserve. It’s not that investors had stopped thinking about the central bank, but many had become somewhat complacent in their expectations that the Fed was winding down its series of interest-rate hikes. But recent comments by Chairman Jerome Powell got everyone’s attention very quickly. Specifically, Mr. Powell repeated his warning that borrowing costs may have to increase more than previously believed. Indeed, rather than approaching a so-called pivot point, there’s now an increased possibility that the lead bank may have to ratchet the pace of increases back up to half a percentage point at its next meeting (scheduled for March 21-22). The benchmark overnight lending rate was raised by a quarter point last month, to a range of 4.5% to 4.75%.
Mr. Powell, speaking before the House Financial Services Committee, indicated that upcoming reports on hiring and price increases would determine if the Fed would need to amend its current course. Thus, traders will be particularly interested in Friday’s employment report. There, the expectation is that the number of positions added in February dropped by more than half compared to the January tally of 517,000. Also, while the unemployment rate is likely to remain flat at 3.4%, the consensus is calling for a slight uptick in the hourly wage increase, to about 0.4%, versus 0.3% the month before. As it stands, Wall Street is now estimating that the Federal Reserve’s terminal rate (that is, the rate at which it will pause) will be around 5.5% to 5.75%, up from a consensus of just over 5% back in December. If it comes to be, it would mark the highest level in 17 years.
Altogether, stocks ended Wednesday’s session mixed, with the Dow Jones Industrials slipping 58 points, or 0.2%, the S&P 500 up 5 points (0.1%), and the tech-focused NASDAQ gaining 45 points, or 0.4%.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
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