US equities rose slightly on Wednesday as markets digested further comments from Federal Reserve chairman Jay Powell on the pace and duration of higher interest rate hikes to fight inflation.
The blue-chip S&P 500 advanced 0.1 percent while the tech-heavy Nasdaq Composite gained 0.4 percent. The move came after Powell spoke to lawmakers in Washington, where he insisted there would be no decision on interest rates before the central bank’s meeting later this month.
“I stress that no decision has been taken on this matter,” the MPs said.
It is the second day before Congress for the Fed chairman, who said on Tuesday that the US central bank may be ready to accelerate the pace of interest rate hikes if the economy and inflation do not cool. The S&P 500 on Tuesday fell 1.5 percent, its biggest daily loss in two weeks.
Analysts said stocks held up better than expected after the Fed’s downgrade. “I’ve been quite impressed and surprised that equities are holding up,” said Veronica Clark, an economist at Citigroup. “It could be a response to the data we’ve had so far, as stronger activity should be positive for equities – but investors may be waiting for payroll data and the consumer price index. They could still fall further.”
Consecutive data releases since February have shown the economy in the grip of sticky inflation despite a year-long campaign of higher interest rates. The latest is data released on Wednesday showing that private employers added more jobs than expected in February – 242,000 according to ADP, compared to 200,000 expected.
The data comes ahead of Friday’s monthly non-farm payrolls and unemployment data, which will be closely watched by investors.
The yield on two-year Treasury notes, which is very sensitive to interest rate expectations, rose 0.05 percentage points to 5.06 percent.
On Tuesday, the two-year yield rose above 5 percent for the first time since 2007 as investors began to price in the possibility that the Fed could raise rates by half a percentage point at its next meeting, instead of the quarter percentage point that had been anticipated.
The yield on US 10-year notes rose 0.01 percentage points to 3.98 percent. Bond prices fall as yields rise.
Earlier in the day the dollar index, which measures the greenback against a basket of six peer currencies, touched its highest point since early December, before giving up the results to trade roughly flat.
European equities recovered most of their early losses in the afternoon. In the region, the Stoxx 600 closed up 0.1 percent, while the London FTSE 100 also rose 0.1 percent and the CAC 40 in Paris lost 0.2 percent. Germany’s Dax rose 0.5 percent after stronger-than-expected industrial production data.
The move followed sharp declines in many of Asia’s biggest markets. Hong Kong’s Hang Seng fell 2.4 percent and South Korea’s Kospi lost 1.3 percent.