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Major market averages whipsaw at the open on Wednesday after Tuesday’s selloff which was prompted by Fed chief Jay Powell’s D.C. appearance.
Early on and the Nasdaq Composite (COMP.IND) picked up 0.2% and the S&P 500 (SP500) gained 0.1%, while the (Dow) slid 0.1%.
The Fed chairman signaled yesterday that a data-dependent FOMC is willing to quicken the pace of tightening, sending stocks down and short-end yields up. After starting the week indicating almost a three-in-four chance of a 25-basis-point hike at the next meeting, fed funds futures switched camps and now show a 74% chance of 50 bps.
‘Powell 2: The Hawkening’ will be on your screens today as he appears before the House Financial Services Committee. The statement will be the same, so the Q&A takes the spotlight.
It “was another landmark day in markets” and the “US terminal has now gone past our street leading 5.6% forecast and closed at 5.624% last night,” Deutsche Bank’s Jim Reid wrote.
The 10-year Treasury yield (US10Y) was lower by 6 basis points to 3.90% and the 2-year yield (US2Y) slid 2 basis points to 4.99%. The 2s10s curve is inverting further after moving above a full percentage point Tuesday for the first time since 1981.
“Bear in mind that on all the previous occasions that the 2s10s has been more than -100bps inverted since data is available from the early 1940s (1969, 1979, 1980 and 1981) a recession has either been underway, or has occurred within a maximum of 8 months,” Reid said. “To highlight the rarity of such an occurrence, there have only been 7-month end closes lower than -100bps in 80 years of available data. So we are in rarefied air.”
ADP private payrolls for February came in above economists expectations with a 242K reading compared to the forecasted 200K consensus figure.
January JOLTS figures fell less than expected. January Job Openings data showed 10.824M versus the anticipated10.6M consensus figure.
The Fed’s beige book of economic activity comes out this afternoon.
The Beige Book is “the economic equivalent of the celebrity gossip magazines available at supermarket checkouts (when supermarket checkouts existed),” UBS’ Paul Donovan said. “Anecdotal evidence is unaffected by seasonal adjustment or fictional concepts like owners’ equivalent rent. It is affected by the media spin cycle and partisan bias.”
Among active stocks, CrowdStrike (CRWD) rallied after strong earnings and outlook.