Dow Jones, S&P 500, Nasdaq flatline to begin March on hawkish Fed speak

4:05pm: Stocks muted to open March

The major US inidices closed the day pretty much where they started as investors signaled nervousness over which direction the Federal Reserve may be heading.

At 4pm, the Dow Jones was flat at 32,662 points, the S&P 500 fell 0.5% at 3,951 and the Nasdaq lost 0.7% to reach 11,379.

Earlier today, the Bank of America said that the Fed could raise interest rates to nearly 6%, according to the bank's Global Research, as the monetary policy body continues to combat inflation.

BofA pointed to high US consumer demand and a tight labor market would force the central bank to continue to raise rates, even higher than the 5.4% September peak that traders are currently pricing in, the firm said.

The bank previously added expectations of another 0.25 basis point increase in June following similar moves in March and May, which would reach a peak rate expectation of 5.25%-5.5%.

Notably, the firm expects the US to enter a recession by the third quarter.

Post-4pm, investor eyes will turn to earnings from Salesforce, as well as the highly anticipated Tesla Investor Day.

9.40am: Stocks lack direction at the open

US stocks fell modestly at the open as investors awaited the release of February’s ISM manufacturing data, a key measure of how the economy performed last month.

Just after the market opened, the Dow Jones Industrial Average had shed 33 points or 0.1% at 32,624 points, the S&P 500 was down 10 points or 0.3% at 3,960 points, and the Nasdaq Composite had lost 34 points or 0.3% at 11,422 points.

FOREX.com market analyst Fiona Cincotta said stocks were lacking direction as investors weighed up a stronger-than-forecast economic recovery in China against concerns that the Federal Reserve will keep raising interest rates higher for longer.

“China’s manufacturing activity grew at the fastest pace in over a decade, fueling bets of a solid economic recovery in the work’s second-largest economy, which could help work towards the soft landing,” she said.

“However, it’s also worth noting that a strong economic recovery in China could also be inflationary, fueling the no-landing scenario.”

In terms of major movers, Rivian Automotive Inc had shed 10.1% after the electric vehicle (EV) manufacturer posted disappointing quarterly results, including production guidance that fell well short of analyst expectations, and announced the recall of about 12,700 vehicles.

Also in the EV space, investors will have their eye on Tesla Inc, with the company’s CEO Elon Musk expected to unveil details of its “Master Plan 3” at its Investor Day today.

6.30am: February ISM data in the spotlight

Wall Street is expected to start the new month on the front foot, with a set of upbeat Chinese PMI surveys boosting Asian markets and investors now looking to US manufacturing data for an indication of how the economy fared in February.

Futures for the Dow Jones Industrial Average (DJIA) rose 0.3% in Wednesday pre-market trading, while those for the broader S&P 500 index gained 0.4%, and contracts for the Nasdaq-100 added 0.5%.

All three major US indices closed out a volatile month in the red on Tuesday. The DJIA ended at 32,657 for a loss of 0.7%, the S&P 500 was down 0.3% at 3,970 and the Nasdaq Composite slipped 0.1% to 11,456.

“January economic data generally surprised on the upside leading to a rapid repricing in terminal rate expectation for US rates,” commented TickMill Group market analyst Patrick Munnelly. “The debate amongst market watchers is the extent to which this bump in activity data was due to milder than usual weather and so February releases are expected to give a cleaner read on the underlying nature of activity in the US.

“Today’s ISM manufacturing metrics and its services counterpart on Friday will be among the first of these February readings and so they are likely to be parsed particularly closely by investors, with consensus coalescing around a continued sub 50 contractionary prints,” Munnelly added.

The ISM manufacturing index, also known as the purchasing managers' index (PMI), is expected to improve to 48 from 47.4 in January. The market will also focus on the Prices Paid and Employment sub-components of the report for an indication of how manufacturers view inflation going forward and whether they are hiring.

On the corporate front, Salesforce, Lowe’s, Dollar Tree and Budweiser report today as the fourth-quarter 2022 reporting season draws to a close.