4:12pm: Markets sink over the course of the afternoon
The Dow closed Tuesday down 575 points, 1.7%, to 32,857, the Nasdaq Composite tumbled 145 points, 1,3%, to 11,530 and the S&P 500 lost 62 points, 1.5%, to 3,986. The small-cap Russell 2000 index dropped 20 points, 1%, to 1,880.
The benchmarks all fell lower after Federal Reserve Chair Jerome Powell told Congress at 10 am this morning that interest rates are likely to increase more than previously expected.
“The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,” Powell said in remarks to the Senate Banking, Housing and Urban Affairs Committee. “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
The selloff was broad, but lagging even further was JetBlue Airways Corporation, shares of which fell nearly 3% after the Department of Justice announced it would sue to block the company's merger with Spirit Airlines Inc. Spirit stock gained more than 4%.
12:05pm: Powell spooks stocks with ‘higher for longer’ rate testimony
US stocks were sharply lower in noon trading after Federal Reserve Chair Jerome Powell told Congress that interest rates are likely to increase more than previously expected.
At midday, the Dow lost 389 points to 33,043 while the S&P 500 eased 44 points at 4,005 and the tech-heavy Nasdaq slipped 87 points to 11,588.
“This isn’t surprising news, but it’s a tough reminder for markets after such a brisk rally,” eToro US investment analyst Callie Cox said.
“People are starting to factor in persistently higher inflation, which could be the worst-case scenario for long-term investors and run the risk of prices spiraling higher,” Cox added.
Notable movers included shares of Dick's Sporting Goods Inc, which climbed 10% after the sporting goods retailer reported record full-year sales after the company grew fourth-quarter comparable store sales by 5.3% as it continued to gain market share.
10:15am: Stocks sink on Powell's comments
US stocks turned red on Tuesday morning after Fed chair Jerome Powell told lawmakers that interest rate hikes will likely be “higher than previously anticipated.”
"The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated," Powell said in prepared remarks for a hearing before the Senate Banking Committee.
"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," Powell said.
After opening flat, the Dow Jones Industrial Average had shed 171 points or 0.5% at 33,260 points, the S&P 500 was down 31 points or 0.8% at 4,018 points, and the Nasdaq Composite had lost 92 points or 0.8% at 11,584 points.
9:35am: Caution ahead of Powell's comments
US stocks opened flat on Tuesday morning as traders eagerly awaited Fed chair Jerome Powell’s congressional testimony, set to kick off at 10am ET.
Just after the market opened, the Dow Jones was sitting at 33,426 points, the S&P 500 at 4,046 points, and the Nasdaq Composite at 11,682 points.
FOREX.com market analyst Fiona Cincotta said investors were shying away from taking out big positions ahead of Powell’s congressional testimony.
“The timing of this testimony is more crucial after a series of stronger-than-expected data across February has seen more hawkish commentary from Fed speakers and investors ramping up their rate hike expectations,” Cincotta said.
“Investors will be looking for any clues over the potential size of the rate hike, with the market now pricing in around a 30% probability of a 50 basis point rate hike. This is up from a 0% likelihood just over 1 month ago.”
She said a hawkish-sounding Powell could drag stocks and gold lower while boosting the USD.
“Meanwhile, should Powell focus on the disinflation process, as he did in the previous Fed conference, then stocks could head higher with gold while bringing the USD lower,” Cincotta said.
“These testimonies, combined with Friday’s jobs report, will likely set the tone for trading over the coming weeks until the FOMC.”
6:30am: All eyes on Powell
Wall Street is expected to open higher before Federal Reserve chair Jerome Powell’s semi-annual report on monetary policy to Congress Tuesday and the Senate on Wednesday and ahead of a key employment report on Friday.
Futures for the Dow Jones Industrial Average (DJIA) rose 0.1% in Tuesday pre-market trading, while those for the broader S&P 500 index gained 0.2%, and contracts for the Nasdaq-100 added 0.3%.
US stocks ended mixed following a choppy session on Monday, with the DJIA closing 0.1% up at 33,431 and the S&P 500 adding 3 points, less than 0.1%, to 4,048. After trading 1.2% higher at one stage, the Nasdaq Composite turned around to close 0.1% lower at 11,676.
“Investors are largely unwilling to take the plunge ahead of two vital indicators later in the week, with most markets treading water in the meantime,” commented Richard Hunter, head of markets at interactive investor. “Federal Reserve chairman Powell’s Congressional testimony and the non-farm payrolls report are the undoubted highlights of the week. Taken together, the two events will provide the latest update on the immediate past, present and future of the world’s largest economy and will be crucial in determining market sentiment.”
Hunter noted that Powell’s remarks to Congress are likely to cover the Fed’s latest reaction to last month’s inflation data, which came in higher than expected. At present, he noted that the market is pricing in three more rate rises this year, including a 0.25% hike later this month, but any increase in hawkish rhetoric would likely spell danger for equity markets.
“Alongside the outcome of the latest Fed thinking, the jobs report on Friday will follow a blistering number from the previous month,” Hunter added. “Expectations are for 225,000 jobs to have been added in February, as compared to 517,000 in January, while close attention will also be paid to both the unemployment rate and wage growth for clues in assessing the current state of the nation.”