
Fabrice Cabaud
Wall Street gained on Wednesday, bouncing back from its worst session since mid-February the previous day. The focus was on Federal Reserve chair Jerome Powell’s testimony to Congress, with the central bank chief largely reiterating that policymakers were in no hurry to cut interest rates.
The tech-heavy Nasdaq Composite (COMP.IND) rose 0.99% to 16,096.78 points in mid-day trade, boosted by a post-earnings surge in cybersecurity firm CrowdStrike (CRWD). The benchmark S&P 500 (SP500) reclaimed the 5,100 points mark, climbing 0.84% to 5,121.16. The blue-chip Dow (DJI) advanced 0.55% to 38,796.14 points.
All 11 S&P sectors were in the green.
In prepared remarks ahead of a testimony to the U.S. House Committee on Financial Services, Powell said that he believed monetary policy rate was “likely at its peak for this tightening cycle.” However, he also reiterated that policymakers wanted to gain “greater confidence” that inflation was moving towards the Fed’s 2% target before it would be appropriate to cut rates.
During the testimony, Powell said that the number of potential rate cuts this year would depend upon the economy. He also wants to see “a little bit more data” before being confident enough that inflation was coming down.
“Brisk inflation and hiring data in January haven’t altered the Federal Reserve’s expectation that it will be appropriate to cut interest rates later this year, but Chair Jerome Powell said officials want more evidence that inflation is slowing sustainably,” the Wall Street Journal’s Fed watcher Nick Timiraos said on X (formerly Twitter).
Market participants also received some indicators on the labor market on Wednesday. An ADP report showed that the U.S. private sector added 140K jobs in February, less than the expected 149K figure. Moreover, the latest Job Openings and Labor Turnover Survey (JOLTS) showed that job openings edged down in January to 8.863M from 8.889M in December 2023. The January reading was lower than the consensus estimate of 8.9M.
“For now, the JOLTS data signal that the jobs market is slowly settling down, consistent with wage, and thus inflation, pressures cooling without a worrisome slowdown in net job creation and overall economic activity. The gradual, rather than marked, softening in the labor market will likely keep the FOMC comfortable in waiting a little while longer before beginning to cut rates,” Wells Fargo’s Sarah House said.
Additionally, the JOLTS report showed that the quits rate fell to its lowest level since August 2020, moving slightly down to 2.1% in January from 2.2% in December 2023.
“Hawks on the FOMC can no longer point to the labor market as a rationale to be hawkish. In January, the total quits rate sank to 2.1%, a fresh cycle low. This means that labor cost pressures are likely easing (with all deference to the last average hourly earnings print),” Renaissance Macro Research said on X.
“For all the talk about layoffs in January, it is worth noting that the ACTUAL layoff rate was unchanged at 1.1%, more or less where it’s been since mid-2022. Perhaps the increase in layoffs was largely a seasonal phenomenon,” RenMac added.
Treasury yields were mixed on Wednesday, with longer-term maturities retreating and shorter-term maturities largely unchanged. The 30-year yield (US30Y) was down 3 basis points to 4.25%, while the 10-year yield (US10Y) was down 4 basis points to 4.10%. The more rate-sensitive 2-year yield (US2Y) was down 3 basis points to 4.53%.
See live data on how Treasury yields are doing across the curve at the Seeking Alpha bond page.
Turning to active stocks, medical device maker Dexcom (DXCM) was the top percentage gainer on the S&P 500 (SP500). The U.S. Food and Drug Administration late on Tuesday approved Dexcom’s (DXCM) Stelo glucose biosensor, the first over-the-counter continuous glucose monitor.