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Main U.S. indexes red: Dow, S&P 500 down more than 1%
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All S&P 500 sectors decline: real estate weakest group
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Euro STOXX 600 index down ~0.8%
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Dollar rises; gains; gold, bitcoin decline, crude off ~3%
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U.S. 10-Year Treasury yield edges down to ~3.96%
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POWELL 'OPENS THE DOOR' TO RETURN TO 50 BPS HIKES (1130 EST/1630 GMT) Remarks by Federal Reserve Chair Jerome Powell Tuesday "opened the door" to a return of 50-basis-point rate hikes at the Fed's March meeting "if data flow warrants it," according to a note from economists at Morgan Stanley just after the release of Powell's remarks. Powell told U.S. lawmakers in opening remarks at a hearing before the Senate Banking Committee that the Fed will likely need to raise rates more than expected in response to recent strong data and is prepared to move in larger steps if the "totality" of incoming information suggests tougher measures are needed to control inflation. One key factor for that rate hike outlook may be this Friday's monthly U.S. jobs report.
"Upside surprises to Friday's payroll report could drive a faster and longer tightening cycle," the Morgan Stanley economists wrote. Moreover, they noted that stronger-than-expected economic data recently suggests the peak rate of interest rates may be higher than previously anticipated. In a separate note, Mark Haefele, chief investment officer at UBS Global Wealth Management, said uncertainty about the trajectory for inflation, monetary policy and economic growth could keep the market volatile in the months ahead. The CBOE Volatility index briefly hit a session low of 18.51 following the release of Powell's comments, but then began to climb again. It was last up around 0.4 points at around 19.00.
(Caroline Valetkevitch)
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U.S. STOCKS PRESSURED BY POWELL REMARKS (1030 EST/1530 GMT) U.S. stocks are taking a hit on Tuesday as Fed Chair Powell told U.S. lawmakers that the Federal Reserve will likely need to raise interest rates more than expected in response to recent strong data and is prepared to move in larger steps if the "totality" of incoming information suggests tougher measures are needed to control inflation. According to the CME's FedWatch Tool, it is now roughly a coin flip (~50%-50%) as to whether the FOMC raises rates 25 or 50 basis points at the March 21-22 meeting. The main U.S. indexes are lower and all S&P 500 sectors are red. Under the surface, banks are among those groups seeing the sharpest losses. That said, there has been some bounce off the lows. The SPX hit a low of 4,009.53, and now stands around 4,025. Regarding Powell's remarks, Quincy Krosby, chief global strategist, at LPL Financial, said, "Coming into the meeting, it was almost a 30% probability priced in by the futures market for a 50 basis points (rate hike)." However, "Powell makes it clear the Fed would react accordingly if the data suggests that inflation continues to move in the wrong direction. And you can see the reaction in the equity market, and at this stage they don't know what the CPI is going to indicate, nor the PPI." Krosby added, "But Powell was matter of fact in that statement. It was very clear to the market that the Fed is not going to equivocate in terms of data that suggests inflation continues to climb higher or remain sticky." Here is a snapshot of where markets stood shortly before 1030 EST:
(Terence Gabriel, Caroline Valetkevitch)
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SILVERGATE'S FAILED PAYMENT SYSTEM COULD BOOST STABLECOIN VOLUMES (0915 EST/1415 GMT) In the wake of Silvergate shutting its crypto payments network - Silvergate Exchange Network - stablecoins could see a boost in trading from traders looking to convert fiat to cryptocurrency, analytics firm Kaiko said. Liquidity in cryptocurrency trading could suffer as SEN served as one of the only fiat payment rails in the industry, other than Signature Bank , Kaiko analysts said in a note on Monday. That leaves the door open for traders to enter crypto markets via stablecoins. "With the death of SEN, stablecoins will likely become even more ubiquitous among traders," Kaiko analysts said. "Rather than deposit your dollars with an exchange, you deposit them with a stablecoin issuer, receive stablecoins, and then transfer those to an exchange." Popularity of stablecoins has increased after FTX imploded. The market share of dollar to tether trade volume for bitcoin trading pairs has climbed to 92% from 3%, recently hitting an all time high in the aftermath of the FTX collapse, Kaiko said.
(Medha Singh)
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S&P 500 INDEX: TRADERS EYE LEVELS AHEAD OF POWELL (0900 EST/1400 GMT) Although the S&P 500 index closed higher for a third-straight session on Monday, it saw most of its early session gains evaporate. After rallying as much as 0.81%, the benchmark index ended up just 0.07%. This action was perhaps not surprising given Fed Chair Powell will testify before the Senate Banking Committee at 10 a.m. ET (1500 GMT) on Tuesday, with investors focused on whether he remains confident about the Fed's moves for bringing inflation towards its 2% target. Meanwhile, traders are eyeing nearby SPX support and resistance levels:
With Monday's early strength, the S&P 500 was able to overlap resistance at its Feb. 10 low at 4,060.79. The SPX hit a high of 4,078.49 before sinking back to close at 4,048.42: Above Monday's high, the resistance line from the January 2022 high, across the Feb. 2 high, now comes in at 4,145. Above here can see the SPX challenge the 4,195.44-4,203.04 area which includes the Feb. 2 high, the 23.6% Fibonacci retracement of the March 2020-January 2022 advance, and the Aug. 26 Fed-Chair Powell Jackson Hole speech high. On weakness, the rising 50-day moving average (DMA) should reside around 3,996 on Tuesday. The 200-DMA, the March 2 low, and a broken resistance line from the January 2022 record high, which is now support, are in the 3,940-3,900 area on Tuesday.
(Terence Gabriel)
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FOR TUESDAY'S LIVE MARKETS POSTS PRIOR TO 0907 EST/1407 GMT - CLICK HERE <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ SPX03072023 earlytrade03072023 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
