US stocks struggled for direction during the trading session on Wednesday, after two jobs prints showed the labor market remains tight amid sticky inflation.
Wall Street heard Federal Reserve Chairman Jerome Powell’s second testimony before the House Financial Services Committee on Wednesday morning.
“When say we will look at the totality of data that will include these next reports. We will analyze carefully. Haven’t made any decision on March meeting. Bigger point is we are not on a pre-set path,” Powell said.
The S&P 500 (^GSPC) ticked down 0.1%, while the Dow Jones Industrial Average (^DJI) fell 0.3%. Contracts on the tech-heavy Nasdaq Composite (^IXIC) fell close to flatline.
Bond yields fell along with a stronger dollar. The yield on the benchmark 1[ads1]0-year US Treasury bond ticked down to 3.92% on Wednesday morning.
US stocks plunged on Tuesday after Powell said during his testimony before the Senate Banking Committee that interest rates could rise “higher” than previously expected as the Fed continues a sustained fight against inflation.
Powell’s comments on Capitol Hill sparked a 1.5% selloff in shares, according to JP Morgan’s trading desk. Tuesday’s losses sent all sectors lower, with financials and property registering the biggest declines for the day.
Treasury yields were higher, with the 2-year yield tipping above 5%, while the spread between the 10-year and 2-year US Treasury yields reversed for the first time since September 1981. According to strategists at Deutsche Bank, reaching this level signals that a recession could be ongoing or have occurred within a maximum of eight months.
“Powell’s speech indicates that the Fed will rely heavily on near-term data for upcoming rate decisions,” Michael Feroli, chief U.S. economist at JP Morgan, wrote in a note Wednesday morning.
“With January’s macro data mostly printed on the hawkish side, NFP Friday and CPI next Tuesday are the most critical catalysts for the Fed’s decision between 25bp and 50bp,” Feroli added.
Still, on the economic data side, ADP’s monthly reading of private payrolls rose 242,000 in February, above consensus expectations for 200,000. ADP also tracked wage growth for those workers who remained in their jobs, which slowed to 7.2% last month, the lowest growth in the last year.
“There is a trade-off in the labor market right now,” Nela Richardson, chief economist, ADP, said in the press release. “We’re seeing robust hiring, which is good for the economy and workers, but wage growth is still quite high. The modest decline in wage increases, alone, is unlikely to drive down inflation quickly in the near term.”
Meanwhile, the US monthly international trade deficit widened to $68.3 billion in January, below the consensus deficit of $68.7 billion as imports rose more than exports, according to the US Bureau of Economic Analysis and the US Census Bureau.
Another highlight Wednesday morning was January’s job vacancies report, which fell to 10.82 million, down from the upwardly revised 11.2 million openings last month, the Bureau of Labor Statistics reported. The construction, leisure, hospitality and finance industries showed the major setbacks in vacancies.
“While the January JOLTS report shows that job vacancies are moving in the right direction for the Fed, the decline is far too modest to convince that labor market conditions are cooling enough to bring down inflation,” wrote Matthew Martin, US economist at Oxford Economics. in a statement following the release.
February’s jobs report on Friday will contain more clues about the strength of the economy. Economists expect 215,000 new jobs to be added to the economy, a slower pace from January’s blowout number of 517,000 new jobs.
Unemployment is expected to remain stable at 3.4 percent. Another important takeaway from the reading will be wage growth, with an expected increase of 0.3% month-on-month in average hourly wages and 4.7% over the past year.
In individual stock moves, Occidental Petroleum Corporation ( OXY ) gained nearly 2% Wednesday morning after a regulatory filing revealed Warren Buffett’s Berkshire Hathaway bought nearly 6 million shares of the oil company in recent days, increasing its stake in the company to 200.2 million shares worth 12 .2 billion dollars.
CrowdStrike Holdings, Inc. ( CRWD ) shares rose 7% on Wednesday after the security software provider reported fourth-quarter earnings that topped analysts’ expectations and provided stronger guidance for the fiscal first quarter.
Shares of Tesla ( TSLA ) fell nearly 2% as Berenberg analyst Adrian Yanoshik cut his rating on the stock from buy to hold, citing “based on misplaced fears of a price war – appears to have been accepted by the market,” noted Yanoshik.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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