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Odds of 50 bps rate hike jump
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Powell says Fed likely needs to raise rates higher
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Financial stocks lead sectoral losses
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Indexes down: Dow 0.27%, S&P 0.34%, Nasdaq 0.13%
(Adds analyst comment, updates prices)
By Sruthi Shankar and Bansari Mayur Kamdar
March 7 (Reuters) - U.S. stock indexes fell on Tuesday
as Federal Reserve Chair Jerome Powell told Congress the central
bank will likely need to raise interest rates more than expected
in response to recent strong data.
The Fed is prepared to move in "larger steps" if the "totality" of incoming information suggests tougher measures are needed to control inflation, Powell told U.S. lawmakers. The remarks were his first since inflation unexpectedly jumped in January and the U.S. government reported an unusually large increase in payroll jobs for the month. Traders drastically increased their bets of a 50-basis-point rate hike in March after Powell's comments, with money market futures pricing a more than 40% chance of such a move, from 23% before the remarks. Meanwhile, Fed fund rates were seen peaking at 5.56% in September compared to 5.47% earlier. "Powell is reiterating what we already know, but he's not saying anything that's dovish, and the market is feeling a bit nervous about the Fed's next move - how many rate hikes are coming and how long are they going to keep rates up," said Robert Pavlik, senior portfolio manager at Dakota Wealth. Weighing on the tech-heavy Nasdaq , the yield on two-year Treasury notes , which best reflects short-term rate expectations, rebounded to its highest since 2007 at 4.96%. Rising bond yields tend to weigh on equity valuations, particularly those of growth and technology stocks, as higher rates reduce the value of future cash flows. Investors are awaiting data later this week that is expected to show nonfarm payrolls increased by 200,000 in February, compared with the much stronger-than-expected 517,000 jobs reported in January.
"A 50 bps hike in the next meeting is possible, but it is
going to be dependent on the payrolls not slowing down and CPI
numbers showing that the disinflation progress we've made is
stalling," said Scott Ladner, chief investment officer at
Horizon Investments.
At 10:36 a.m. ET, the Dow Jones Industrial Average was down 90.36 points, or 0.27%, at 33,341.08, the S&P 500 was down 13.77 points, or 0.34%, at 4,034.65, and the
Nasdaq Composite was down 15.15 points, or 0.13%, at
11,660.59.
All the 11 major S&P sectors fell, with the financial index leading declines.
Among individual stocks, Rivian Automotive tumbled
10.5% after the electric automaker unveiled plans to sell bonds
worth $1.3 billion.
Meta Platforms Inc climbed 2.0% after Bloomberg
News reported the company will cut thousands of jobs as soon as
this week in a fresh round of layoffs.
Snapchat owner Snap Inc extended gains by 6.4%
after Senator Mark Warner said a bipartisan group of 12 U.S.
senators will introduce legislation that would give Commerce
Secretary Gina Raimondo new powers to ban Chinese-owned video
app TikTok.
Dick's Sporting Goods rose 9.9% after the retailer
forecast annual earnings above Wall Street estimates and more
than doubled its quarterly dividend.
Declining issues outnumbered advancers for a 1.99-to-1 ratio
on the NYSE and 1.54-to-1 ratio on the Nasdaq.
The S&P index recorded 10 new 52-week highs and four new
lows, while the Nasdaq recorded 30 new highs and 77 new lows.
(Reporting by Sruthi Shankar and Bansari Mayur Kamdar in
Bengaluru; additional reporting by Ankika Biswas by Shristi
Achar A
Editing by Vinay Dwivedi)
