Wall Street is set to open higher as focus turns to Powell’s testimony

(Reuters) – US stock indexes are set to open slightly higher on Tuesday in cautious trading ahead of Federal Reserve Chairman Jerome Powell’s congressional testimony that could shed more light on the central bank’s plans to raise interest rates.

The Standard & Poor’s 500 (.SPX) closed higher for the third consecutive session on Monday, as Treasury yields took a break from their recent rally that was driven by hopes that the Federal Reserve would keep interest rates at a higher level than many expected at the start of the year.

Powell will testify before the Senate Banking Committee at 10:00 AM ET (1500 GMT), as investors await his comments on the Fed’s steps to bring inflation toward its 2% target.

In his latest press conference, Powell said that the “inflationary easing process” had begun, while warning that the central bank’s fight against rising prices was far from over.

Inflation data since Powell’s remarks on February 1 showed that prices did not fall as much as analysts expected, while the labor market showed signs of resilience.

“We don’t really expect to share anything new, he (Powell) will probably remain hawkish. He’ll say we need to be higher for a while and everything else we’re pretty much hearing so far,” he said. Sam Stovall, chief investment strategist at CFRA Research, New York.

The yield on two-year Treasury notes, which better reflects expectations of short-term interest rates, hit its highest level since 2007 at 4.94% last week and has since hovered below that level.

Higher bond yields tend to affect equity valuations, particularly those of growth and technology stocks, as higher rates reduce the value of future cash flows.

Recent economic data and comments from Fed policymakers have prompted traders to reassess the price path, with money market futures pricing in a 28% chance that the central bank will raise rates by a larger 50 basis points in March, according to CME Group’s Fedwatch tool. .

Traders see the fed funds rate peaking at 5.46% by September, from the current 4.67%.

“Street is looking for any indication that the Fed is going to target more towards 6%, and that would be a bigger concern… 5.5% is already being weighed by the market,” Stovall said.

Investors are also awaiting data later this week that is expected to show non-farm payrolls increased by 200,000 in February, compared to the much stronger-than-expected 517,000 payrolls reported in January.

Bank of America (BAC.N) CEO Brian Moynihan said the US economy will reach a technical recession in the third quarter of 2023.

At 08:27 a.m. ET, the Dow e-minis were up 25 points, or 0.07%, the S&P 500 e-minis were up 6.25 points, or 0.15%, and the Nasdaq 100 e-minis were up 32.5 points, or 0.26%.

Among individual stocks, Rivian Automotive (RIVN.O) fell 5.7% in premarket trading after the electric car maker revealed plans to sell $1.3 billion in bonds.

Meta Platforms Inc (META.O) gained 2.3% after Bloomberg News reported that the company will cut thousands of jobs as soon as this week in a fresh round of layoffs.

Dick’s Sporting Goods (DKS.N) rose 6.1% after the retailer forecast higher-than-Wall Street annual profits and more than doubled its quarterly profit.

(Covering) By Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru Editing by Vinay Dwivedi

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