US stocks were under pressure on Tuesday after Federal Reserve Chairman Jerome Powell told Congress that interest rates are likely to go “higher” in the face of persistent inflation.
At around 2:20 p.m. ET, the benchmark S&P 500 index (^GSPC) was near session lows, down 1.5%, with the Dow Jones Industrial Average (^ DJI) by 1.7%, and the Nasdaq Composite (^IXIC) down 1.2%.
Tuesday’s losses put the S&P 500 on pace for its worst day in two weeks and saw the index back below the key 4,000 level and break its 50-day moving average, an indicator traders are watching closely. to spot signs that stocks are breaking from recent trends. .
“Fed Chairman Jerome Powell confirmed today that interest rates are expected to rise more than expected,” wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics. “But with most evidence still pointing to economic weakness and significantly lower inflation this year, we still believe the Fed will start cutting rates again sooner than markets expect.”
Powell delivered the first of his two days of biannual congressional testimony on Tuesday, speaking before the Senate Banking Committee ahead of Wednesday’s appearance before the House Financial Services Committee. In his prepared testimony released Tuesday, Powell spoke of a sustained campaign by the central bank to contain inflation.
“The latest economic data is stronger than expected, suggesting that the ultimate level of interest rates is likely to be higher than expected,” Powell said. “If all the data were to indicate that faster tightening is warranted, we would be prepared to accelerate the pace of rate hikes.”
Responding to questions from lawmakers, Powell said the full effects of the Fed’s interest rate hikes have yet to be felt in the economy.
Markets have started pricing in at least two more 0.25% rate hikes from the central bank in its next two meetings; investors started the year with optimism that the Fed would end its rate hike campaign as early as February.
Powell’s comments on Tuesday opened the door to the possibility of a higher terminal federal funds rate, as well as a higher rate of increase. According data from CME Group, Powell’s comments prompted traders to predict a greater likelihood of a 0.50% rise than a 0.25% rise later this month.
The Fed will begin its next two-day policy meeting in two weeks, with a policy announcement scheduled for the afternoon of March 22.
Elsewhere in the markets, WTI crude oil was under pressure, falling more than 3% to below $78 a barrel. The 10-year Treasury yield, which has been the center of market action for the past few weeks, fell about 4 basis points to trade near 3.94%.
On the profit side, Dick’s Sporting Goods results (SDKs) early this morning sent shares of the sporting goods retailer up as much as 10%.
The company offered full-year earnings per share guidance that came in more than $1 per share above expectations, according to Bloomberg data. Dick’s expects to earn between $12.90 and $13.80 per share in its 2023 fiscal year, up from $12.04 last year.
The company’s fourth-quarter comparable store sales rose 5.3% as CEO Ed Stack told investors that the company’s inventory levels were in “great shape” to start 2023.
Elsewhere in Single Action Moves, Snap Actions (SNAP) gained more than 9% on Monday and another 2.8% around midday Tuesday, with Bloomberg attributing the rally optimistic about a ban on TikTok in the United States
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