Futures for stocks barely changed. As Federal Reserve Chairman Jerome Powell said on Tuesday that interest rates might need to rise for longer, the market began to decline broadly on Wednesday.
Futures for the Dow Jones Industrial Average moved down 36 points, or 0.1%. Futures for the S&P 500 and Nasdaq 100 both fell by 0.1%.
On Tuesday, the Dow closed almost 575 points lower. The important 4,000 level was breached by the S&P 500 by 1.53%, and the Nasdaq Composite fell by 1.25%. Bond yields rose in tandem with the stock market’s steep collapse, with the 2-year Treasury note’s yield exceeding 5% and reaching its highest level since 2007.
Following Powell’s testimony before the Senate Banking, Housing, and Urban Affairs Committee, the markets experienced a jolt. He advised lawmakers that due to persistently strong economic statistics in recent weeks, the terminal rate set by the central bank will probably be higher than initially anticipated.
Seth Carpenter, global chief economist at Morgan Stanley, stated on CNBC’s “Closing Bell: Overtime” that “[Powell] is being very, very clear] that if you look at what transpired over the past year and a half, the prediction on inflation didn’t pan out.”
Carpenter: “I think Powell is now very much on board with the idea that he does not want to be taken off guard again, and he did just that by opening the door very wide for a 50 basis point hike added.
Investors will be eagerly monitoring Powell’s appearance before the House Financial Services Committee on Wednesday. Wednesday morning will also feature a speech on the labor market from Richmond Fed President Tom Barkin. The ADP employment report for February as well as data on labor turnover and job openings from January are both due.