Stock indexes finished higher Tuesday as traders reacted to remarks from Federal Reserve Chair
Jerome Powell,
his first since the job market’s surprisingly strong showing Friday.
Stocks started Tuesday morning lower, but gained ground shortly after Mr. Powell began speaking in a broadcast conversation with
co-founder
David Rubenstein.
A flurry of selling then sent indexes back into the red, but stocks regained positive territory later in the afternoon.
The S&P 500 rose 1.3% and the Nasdaq Composite added 1.9%. The Dow Jones Industrial Average rose 0.8%. Each is up slightly so far this week.
The ricochets up and down were evidence that tactical trading considerations—not the substance of Mr. Powell’s remarks—were driving Wall Street’s reaction, said
David Bahnsen,
chief investment officer at The Bahnsen Group.
“I really thought his messaging was shockingly consistent with what he said last week,” Mr. Bahnsen said. “The market move is clearly and obviously related to people who tried to front-run his remarks having to cover their positions.”
Government borrowing costs, which usually move fast to reflect changes in expected Fed policy, signaled no major update. The benchmark 10-year U.S. Treasury yield edged up to 3.673%, from 3.632% Monday. The rate-sensitive two-year yield was up slightly to 4.469%. Yields rise as bond prices fall.
Bets in fed-funds futures markets show that traders are still firmly convinced that another quarter-percentage-point interest-rate rise is the Fed’s likely next move when central bankers convene in March, according to CME Group’s tracker.
In the longer run, Wall Street has grown optimistic that the Fed is approaching the end of its most aggressive series of interest-rate increases since the 1980s. But Friday’s stronger-than-expected jobs data had raised questions about whether the Fed will need to raise rates more, or keep them higher for longer, to temper inflation.
Some investment shops warn it is still too early to celebrate the Fed’s victory over rising prices.
“I think the Fed will have to retain a restrictive stance with rates. The labor market is too strong and that will continue to feed wage and services inflation,” said Dan Boardman-Weston, chief executive at BRI Wealth Management.
That sentiment has threatened to puncture a market rally that in recent weeks drove up riskier assets, from high-yield bonds and the tech-heavy Nasdaq to bitcoin and shares in companies like the used-car seller
Mr. Boardman-Weston said he expects higher borrowing costs and inflation to eat further into companies’ profitability. Companies in the S&P 500 are expected to report that profit margins shrank by 8.7% in the fourth quarter compared with the prior year, according to estimates from
A decline in quarterly earnings reported Tuesday morning by Carrier Global, a maker of heating and air-conditioning equipment, sent the stock down 3.6% in afternoon trading. Chemicals giant
on the other hand, gained 6.9% after posting a better-than-expected adjusted profit.
Shares of
fell 48% after the beleaguered retailer gained financial breathing room by reaching a deal to sell additional equity, diluting existing shareholders’ stakes.
A stock market rally in recent weeks has driven up prices for riskier assets.
Photo:
ANDREW KELLY/REUTERS
In commodity markets, oil prices rose after devastating earthquakes in Turkey and Syria on Monday closed a key export terminal. Brent crude, the global benchmark, rose 3.3% to $83.69 a barrel.
Turkey’s Borsa Istanbul 100 slid 8.6% as the death toll from the earthquakes continued to rise and rescue teams raced to reach people buried under buildings.
The Stoxx Europe 600 rose 0.2%.
shares jumped about 8% after the oil giant reported a $27.7 billion profit for 2022 and said it would boost its dividend and buy back more shares.
In Asia, Hong Kong’s Hang Seng Index rose 0.4% while Japan’s Nikkei 225 was close to flat.
Write to Chelsey Dulaney at chelsey.dulaney@wsj.com and Matt Grossman at matt.grossman@wsj.com
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