US stocks trade mixed as investors assess outlook for rates after Powell testimony

Andrew Kelly/Reuters

• Stocks traded mixed on Wednesday following Powell's hawkish two-day testimony before Congress.
• The Fed Chair warned steeper rate hikes may be needed due to strong economic data.
• Higher interest rates could also raise the risk of recession, which is weighing on investors.

US stocks traded mixed on Wednesday following the conclusion of Federal Reserve Chairman Jerome Powell's hawkish testimony before Congress, where he signaled steeper rates hikes are on the table if the economy is still showing signs of running too hot. 

Markets were pricing in higher odd of the Fed dialing rate hikes back up to 50 basis points at the upcoming meeting, a reversal following last month's downsized move of 25 basis points. 

The Fed chief pointed to strong economic data in recent months, which suggests more monetary tightening is needed to rein in the economy. ADP data released on Wednesday showed private payrolls jumping by 242,000 in February, beating estimates. Investors are anxiously waiting on Friday's non-farm payroll report, which is expected to show 203,000 jobs added last month. 

"The labour market remains extremely tight despite 450 basis points of rate hikes in the last year," Lazard chief market strategist Ronald Temple said in a statement. "Friday's employment report will give us more insight into the degree of tightness in the labour market, but this report adds weight to the Chair Powell's comments yesterday suggesting a 50-basis point rate hike on March 22nd could be in the cards." 

Higher interest rates are also raising investors' fear of an incoming recession. 

"The risk of a recession has now increased in recent weeks, as the lag effect from the Fed's tightening may soon start to show up in the data, just as the Fed has doubled down on raising interest rates. This combination of a weakening economy and more rate hikes would surely push the economy into a recession," Main Street Research chief investment officer James Demmert said.

Here's where US indexes stood at the 4 p.m. closing bell on Wednesday:

• S&P 500: 3,992.08, up 0.14%

• Dow Jones Industrial Average: 32,798.60, down 0.18% (57.86 points)
• Nasdaq Composite: 11,576.00, up 0.4% 

Here's what else is going on: 

• The rally in stocks won't be swayed by a hawkish Powell, as falling inflation still points to a 20% gain this year, Fundstrat said.
• The US housing market is in a recession, according to strategist Liz Ann Sonders.
• The European Union is buying up Russian LNG at the highest level in three years, according to one European think tank.
• Western sanctions have weakened the dollar's dominance, a report said, as India is buying Russian oil with other currencies.
• A reading of over 200,000 jobs added in February would be the Fed's trigger to deliver a big rate hike in March, Barclays said.

In commodities, bonds, and crypto: 

• Oil prices slipped, with West Texas Intermediate down 1.41% to $76.49 a barrel. Brent crude, the international benchmark, inched lower 1% to $82.50 a barrel.
• Gold ticked higher 0.13% to $1,815.88 per ounce.
• The 10-year Treasury yield edged up to 3.98%
• Bitcoin slipped 0.42% to $21,989.56.