NEW YORK: Wall Street stocks were mixed at the end of a choppy session on Wednesday (March 8) as markets weighed recession fears while a Federal Reserve (Fed) report described inflation as persisting.
Analysts fretted over a bond market indicator that has historically been a warning sign of recessions: the gap in yields between the two- and 10-year Treasuries, with the shorter-term issue higher.
This “inversion” of the norm “is adding to investors’ worries,” said Sam Stovall, chief investment strategist at CFRA Research. “Whenever we have a deep inversion ... that has pointed to recession in the past.”
At the end of the session, the Dow Jones Industrial Average had fallen 58.06 points, or 0.18%, to 32,798.4; the S&P 500 closed up 5.64 points, or 0.14%, at 3,992.01; and the Nasdaq Composite added 45.67 points, or 0.4%, to end at 11,576.00.
The Fed’s “beige book” survey of economic conditions warned that the US economy still faced “widespread” inflationary pressures.
The report came a day after Fed chair Jerome Powell told a Senate panel the US central bank could hike rates more than expected to quash inflation.
In his second day of testimony to Congress on Wednesday, Powell reaffirmed his message from Tuesday, of higher and potentially faster interest rate increases. However, he suggested that the next rate increase decision hinges on data to be issued before the Fed’s March meeting.
“Investors are digesting Fed Chair Powell’s testimony to Congress and data indicating that the job market remains pretty hot,” said Tom Hainlin, national investment strategist at US Bank Wealth Management, in Minneapolis.
Hainlin sees Friday's non-farm payroll report and next week's inflation readings for February as the keys to whether the next rate increase will be 25 or 50 basis points.
Traders kept increasing bets for a Fed rate hike of 50 basis points later this month, with fed funds futures 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 FedWatch tool.
Data released on Wednesday showed private sector employment surged by 242,000 jobs in February, around double the prior month’s level and significantly more than analysts expected.
The figures come ahead of Friday's keenly-anticipated government jobs data for February. Analysts expect the US economy added 205,000 jobs last month and that unemployment held steady at 3.4%.
Tesla Inc slid 3% after the US 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 gained 2% after Warren Buffett's Berkshire Hathaway Inc increased its stake in the oil company to about 22.2%. – AFP, Reuters