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(Reuters) – The S&P 500 index edged lower on Wednesday as investors grappled with mixed messages from Federal Reserve Chair Jerome Powell and U.S. economic data ahead of February’s labor and inflation reports.
Stocks fell sharply on Tuesday after Powell told U.S. lawmakers the Fed would likely need to raise interest rates more than expected. But in a second day of testimony to Congress on Wednesday, the policymaker did not commit to a widely expected 50 basis point rate hike in March.
Powell said the Fed had not yet made a call on the size of the rate increase, suggesting that would depend on economic data.
Data released on Wednesday showed U.S. private payrolls increased more than expected in February, pointing to a strong labor market ahead of Friday’s closely watched nonfarm payrolls report.
The U.S. jobs report showed openings decreased to 10.82 million in January, worse than economists’ expectations for 10.5 million, and data for the prior month was revised higher. Layoffs rose in January and job cuts were higher than initially thought in 2022 while fewer people voluntarily quit their jobs.
“We received very little definitive guidance today from the numbers and Powell was kind of neutral, reinforcing that he’s data dependent,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.
So with very clear economic guidance to change investors’ minds ahead of Friday’s jobs report, “nobody wants to take particularly large bets before the payroll numbers and the inflation numbers,” Phipps said.
Traders kept increasing bets for a U.S. central bank rate hike of 50 basis points later this month, with fed funds futures most 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 (NASDAQ:CME) FedWatch tool.
The Dow Jones Industrial Average fell 158.3 points, or 0.48%, to 32,698.16; the S&P 500 lost 6.8 points, or 0.17%, at 3,979.57; and the Nasdaq Composite added 9.43 points, or 0.08%, at 11,539.76.
Among the S&P’s 11 major sectors, six were in the red with energy falling most, down 1.3%. Leading gains was real estate, up 0.96%.
Tesla (NASDAQ:TSLA) Inc slid 3.3% 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 (NYSE:OXY) gained 1.8% after Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) Inc increased its stake in the oil company to about 22.2%.
Declining issues outnumbered advancers on the NYSE by a 1.46-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored decliners.
The S&P 500 posted two new 52-week highs and 11 new lows; the Nasdaq Composite recorded 40 new highs and 155 new lows.
