U.S. stocks trade mixed as investors gauge rate outlook after Powell’s speech

  • Shares traded mixed on Wednesday after Powell’s aggressive two-day testimony before Congress.
  • The Fed chairman warned that a sharper rate hike may be needed due to strong economic data.
  • Higher interest rates could also raise the risk of a recession, putting pressure on investors.

U.S. stocks traded mixed on Wednesday after Federal Reserve Chairman Jerome Powell gave an opinion before Congress where he signaled a sharper hike in interest rates if the economy is still showing signs of overexertion.

Markets were pricing in a better chance of the Fed raising rates to 50 basis points at the upcoming meeting, a reversal from last month’s 25 basis point cut.

The head of the Fed pointed to strong economic data in recent months, which suggests that further tightening of monetary policy is needed to contain the economy. ADP data released on Wednesday showed that private sector jobs rose by 242,000 in February, beating estimates. Investors are looking forward to Friday’s nonfarm payrolls report, which is expected to show 203,000 jobs added last month.

“The labor market remains extremely tight despite a 450 basis point rate hike last year,” Lazard chief market strategist Ronald Temple said in a statement. “Friday’s employment report will give us more information on the extent of labor market tightness, but this report lends weight to Chairman Powell’s comments yesterday that a 50 basis point rate hike could be made on March 22.”

Higher interest rates are also adding to investors’ fears of an impending recession.

“Recession risk has increased in recent weeks as the lagging effect of the Fed tightening could soon begin to show in the data, just as the Fed doubled its rate hike. This combination of a weakening economy and further rate hikes will likely push the economy into recession,” said James Demmert, chief investment officer at Main Street Research.

Here’s where the US stocks were at the close at 4:00 pm on Wednesday:

Here’s what else is happening:

In commodities, bonds and cryptocurrencies:

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