Equities Advance as Market Awaits Powell’s Remarks, Inflation Data Surprises

Federal Reserve Chairman Jerome Powell

Stocks traded higher on Wednesday morning, with investors eagerly anticipating Federal Reserve Chair Jerome Powell’s upcoming speech for insights into the future path of interest rates. The S&P 500 gained approximately 0.4%, while the Dow Jones Industrial Average rose about 0.2%. The tech-heavy Nasdaq Composite outperformed, climbing 0.6% after the major indices ended Tuesday’s session in negative territory.

The strong start to the year for stocks had been tempered by robust economic data, which dampened hopes for three Fed rate cuts. Investors have adjusted their expectations, now anticipating a smaller and later easing compared to the projections made by policymakers.

Stocks reversed earlier losses on Wednesday morning following the release of data showing prices paid in the services sector hitting their lowest level since March 2020, suggesting potential future declines in inflation. This data stood in stark contrast to a similar reading from the manufacturing sector on Monday, which indicated that inflationary pressures were increasing last month.

In other economic news, ADP reported that the U.S. private sector added 184,000 jobs in March, with worker pay increasing by 5.1% year-over-year as inflation eased. ADP chief economist Nela Richardson highlighted that the pay gains were surprising not only for their magnitude but also for the sectors that experienced them, with construction, financial services, and manufacturing recording the three largest increases for job-changers.

The ADP report revealed that 142,000 of the newly created jobs were in the service sector, while 42,000 were added in goods-producing industries such as manufacturing, construction, and natural resources/mining. Regionally, the South led the way with 91,000 jobs created in March, followed by the West with 53,000, the Midwest with 28,000, and the Northeast with 20,000. Medium-sized companies were the top job creators, adding 93,000 positions, while large companies and small businesses created 87,000 and 16,000 jobs, respectively.

On Tuesday, the Bureau of Labor Statistics reported that the total number of job openings remained relatively unchanged at 8.8 million on the last day of February. Increases were observed in finance and insurance, state and local government (excluding education), and arts, entertainment, and recreation, while decreases were seen in information and federal government.

Market participants are now focused on Powell’s speech on the economic outlook later in the day, which will be closely analyzed for any indications of a potential policy pivot at the Fed’s June meeting. Earlier on Wednesday, Atlanta Fed President Raphael Bostic told CNBC that he expects the Fed to implement its first interest rate cut in the fourth quarter.

Investors are also keeping a close eye on the outcome of the contentious proxy battle between Disney and activist investor Nelson Peltz, with the results of a shareholder vote expected later on Wednesday. Sources told Reuters that Disney has likely garnered sufficient support to ward off the board shake-up proposed by Peltz’s Trian.

In individual stock moves, Intel shares dropped around 7% after the chipmaker reported wider operating losses in its foundry business. Meanwhile, Intel’s competitor TSMC was compelled to suspend some chipmaking operations following a powerful earthquake that struck Taiwan, raising concerns about the supplier to Apple and Nvidia. TSMC’s U.S.-listed shares experienced a slight decline.

As investors continue to navigate the intricate relationship between economic data, corporate developments, and monetary policy, the market’s attention remains firmly fixed on the Fed’s upcoming decisions and the trajectory of inflation. While the services sector data provided some relief, the overall economic picture remains mixed, with the labor market continuing to exhibit resilience.


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