Following two job prints that demonstrated the labour market is still tight despite stubborn inflation, U.S. markets ended the day with a mixed result.
Before the House Financial Services Committee on Wednesday morning, Jerome Powell, the chairman of the Federal Reserve, also addressed Wall Street. At the Fed’s policy meeting in March, Powell reiterated that “no decision” had been taken regarding the extent of the next interest-rate rise.
“When we say we’ll look at the whole data set, we’ll include these upcoming reports in that. We’ll do a thorough analysis. Regarding the March meeting, no decision has been taken. The bigger point is that we aren’t following a predetermined course, Powell told Congress on his second day of evidence.
The Dow Jones Industrial Average (DJI) fell by 0.2%, while the S&P 500 (GSPC) gained 0.1% at the day’s finish. Contracts on the heavily weighted Nasdaq Composite for technology (IXIC) rose 0.4%.
Along with a stronger currency, bond yields increased somewhat. On Wednesday, the yield on the standard 10-year U.S. Treasury note increased slightly to 3.98%.
After Powell stated during his Senate Banking Committee testimony that interest rates may rise “higher” than anticipated as the Fed continues its tenacious fight against inflation, U.S. equities crashed on Tuesday.
According to JP Morgan’s trading department, Powell’s remarks on Capitol Hill caused a 1.5% decline in the value of the stock market. With regard to Tuesday’s losses, every industry was down, with the greatest drops occurring in the banking and real estate sectors.
The two most important factors influencing the Fed’s decision between 25bp and 50bp are the NFP on Friday and the CPI on Next Tuesday, Feroli continued.
However, ADP’s monthly reading on private payroll growth increased by 242,000 in February, exceeding estimates for 200,000 in terms of economic statistics. ADP also monitored the wage increase for employees who remained in their jobs, which slowed to 7.2% last month, the smallest rate of advances over the previous year.
Right now, there is a trade-off in the labour market, according to Nela Richardson, chief economist at ADP. Although there is strong hiring going on, which is excellent for the economy and workers, pay growth is still relatively high. On its own, the moderate reduction in pay increases is unlikely to significantly reduce inflation in the foreseeable future.
In the meantime, as imports rose more than exports, the U.S. monthly trade deficit expanded to $68.3 billion in January, undershooting the consensus shortfall of $68.7 billion.
Another noteworthy item from Wednesday morning was the Bureau of Labour Statistics’ report on job opportunities for January, which showed a decrease to 10.82 million from the previously reported 11.2 million positions. The number of job vacancies significantly declined in the banking, leisure, hospitality, and construction sectors.
Although the January JOLTS report indicates that job openings are moving in the right direction for the Fed, Matthew Martin, a U.S. economist at Oxford Economics, stated that the labour market conditions are not yet cooling sufficiently to reduce inflation.
The jobs report for February, due out on Friday, will provide more information about the health of the economy. The number of new jobs expected to be created to the economy is predicted to be 215,000, down from January’s record-breaking number of 517,000.
It is anticipated that the unemployment rate would remain at 3.4%. Wage growth will be another important finding from the report, with an expected 0.3% increase in average hourly wages from month to month and 4.7% over the previous year.
Following the disclosure in a regulatory filing that Warren Buffet’s Berkshire Hathaway had recently purchased nearly 6 million shares of the oil company, increasing its stake in the business to 200.2 million shares valued at $12.2 billion, Occidental Petroleum Corporation (OXY) rose more than 2% on a single-stock basis on Wednesday.
Wednesday saw a 3% increase in shares of CrowdStrike Holdings, Inc. (CRWD) after the security software company posted fourth-quarter earnings that above analysts’ forecasts and provided more optimistic guidance for the first quarter of the fiscal year.