March 8 (Reuters) – U.S. stock indexes struggled for direction on Wednesday as investors worried about a possible recession, a day after comments by Federal Reserve Chairman Jerome Powell prompted sharp rate hikes.
Ahead of Friday’s key nonfarm payrolls report, U.S. private payrolls rose more than expected in February, pointing to continued labor market strength.
Powell told U.S. lawmakers on Tuesday that the Fed may need to raise interest rates more than expected as it tries to control inflation, sending major U.S. stock indexes down more than 1%, with the S&P 500 (.SPX) posting its biggest percentage decline. In two weeks.
Traders sharply increased their bets that the U.S. Federal Reserve will raise rates by 50 basis points later this month, with money market futures pricing nearly 70% likelihood of such a move.
Powell will testify again before the House Financial Services Committee at 10:00 a.m.
A closely watched portion of the U.S. Treasury yield curve saw its deepest inversion in more than 40 years on Tuesday. Such a reversal is considered a reliable bearish indicator.
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“The two-year yield shows you that the Treasury curve is taking the Fed seriously about where interest rates are going, whereas the 10-year is really trying to get behind that hard landing story,” Art Hogan said. Market Strategist at B Riley Wealth.
“If we don’t get some data in the next couple of weeks, we won’t know which way to land. Unfortunately the most important data doesn’t come until Friday, so we’ve got a market that’s a bit skewed.”
BlackRock’s chief investment officer of global fixed income, Rick Ryder, said the central bank could raise rates to 6% and keep them there for a long time to fight inflation. Traders now expect the central bank’s funds rate to rise to 5.66% by September.
Labor Department data at 10:00 a.m. ET may show U.S. job creation rose to 10.5 million in January after unexpectedly rising to 11 million in the previous month.
At 9:38 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 7.11 points, or 0.02%, at 32,849.35 and the S&P 500 (.SPX) was down 1.51 points, or 0.04%, at 3,984.86. Composite (.IXIC) was up 5.46 points, or 0.05%, at 11,535.80.
Tesla Inc ( TSLA.O ) fell 2.6% after the U.S. auto safety regulator said it would open a preliminary investigation following reports of steering wheels falling off while driving 120,000 Model Y 2023 vehicles.
Occidental Petroleum Corp ( OXY.N ) rose 3.4% after Warren Buffett’s Berkshire Hathaway Inc ( BRKa.N ) boosted its stake in the oil company to about 22.2%.
Declining issues outnumbered advancers by a 1.11-to-1 ratio on the NYSE and 1.38-to-1 on the Nasdaq.
The S&P index posted no new 52-week highs and eight new lows, while the Nasdaq posted 11 new highs and 57 new lows.
Reporting by Shruti Shankar and Bansari Mayur Kamdar in Bengaluru, Additional reporting by Amrutha Kantekar Editing by Vinay Dwivedi
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