US close: Stocks mixed on Powell's second day of testimony

dl new york stock exchange us markets wall st wall street nyse dow jones industrial average sp500 trading unsplash — Sharecast / Aditya Vyas via Unsplash

Stock markets on Wall Street ended with a mixed performance on Wednesday, as Federal Reserve chairman Jerome Powell testified on Capitol Hill for the second consecutive day.

The Dow Jones Industrial Average declined by 0.18%, closing at 32,798.40.

In contrast, the S&P 500 increased by 0.14%, closing at 3,992.01, and the Nasdaq Composite rose by 0.4%, closing at 11,576.00.

In currency markets, the dollar's performance was mostly negative, declining 0.01% on the pound to last trade at £0.8442.

The dollar-euro pair decreased 0.02% to €0.9481, while it weakened 0.28% against the yen to change hands at JPY 136.98.

“Jerome Powell has once again grabbed the limelight, as the Federal Reserve chair sought to limit the losses associated with yesterday’s hawkish comments in Washington,” said IG senior market analyst Joshua Mahony.

“As is often the case, the second day of testimony from Powell provided a chance to fine-tune market expectations after an initial appearance which drew equity bulls back into their shells.”

Mahony said Powell had done a “good job” of waking up markets to the risk that rates could be higher for longer in a bid to drive down inflation.

“While we have seen stocks stabilise somewhat today, the data-dependent nature of the Fed could mean a 50-basis point hike if inflation fails to head lower next week.”

Jobs data mixed as trade deficit widens less than expected

In economic news, the US Department of Labor reported that the number of job openings declined at the beginning of the year, although by less than anticipated.

In seasonally-adjusted terms, job openings were down by 3.6% month-on-month to 10.824 million.

That figure was higher than economists at Barclays had anticipated, having predicted a decline to 10.3 million.

Job openings for December were revised up from 11.012 million to 11.234 million.

Additionally, hiring rose by 1.9% compared to December to 6.372 million, and the number of voluntary separations or 'quits' fell by 5.1% to 3.884 million.

As a result, the quits rate ticked lower by 0.1% to 2.5%.

Elsewhere, private sector employment in the US rose more than expected in February, according data from ADP.

Employment increased by 242,000 from January, exceeding expectations for a 200,000 jump.

The figures also showed that annual pay was up by 7.2%.

While small businesses with fewer than 50 employees shed 61,000 jobs, medium businesses with between 50 and 499 employees added 148,000 jobs.

Additionally, large businesses with more than 500 employees added 160,000 jobs.

The service sector created 190,000 jobs, while the goods-producing sector saw a 52,000 increase.

“There is a trade-off in the labour market right now,” said Nela Richardson, chief economist at ADP.

“We're seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated.

“The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near term.”

Meanwhile, America's trade deficit with the rest of the world widened in January by slightly less than anticipated, according to the Department of Commerce.

In seasonally-adjusted terms, the trade deficit in goods and services increased at a month-on-month pace of 1.6% to -$68.3 billion.

Economists had expected a deficit of -$69 billion.

Total exports were 3.4% higher on the month, reaching $257.5 billion, while imports grew by 3.0% to $325.8 billion.

Among exports, pharmaceuticals jumped by $2.8 billion, civilian aircraft by $0.5 billion, and auto vehicles, parts, and engines by $1.2 billion.

Looking at imports, purchases of cell phones and other household goods rose by $1.6 billion, while those of trucks, buses, and special purpose vehicles were up by $1.4 billion.

“The rebound in trade flows to start the year signals that the economy continues to carry momentum, but we do not expect the strength to be sustained in the months ahead,” said Matthew Martin, US economist at Oxford Economics.

“Imports and exports are likely to weaken as consumers and businesses pull back, leading the deficit to move sideways through the first half of the year.

“As such, we expect trade's impact on GDP to be much more muted than the large positive contributions to growth in the final three quarters of 2022.”

Soup giant up, grocery wholesaler tanks on earnings

In equities, Campbell Soup Company stock rose by 1.94% after the company reported better-than-expected adjusted earnings due to higher prices for its food products.

CrowdStrike Holdings also had a strong day, increasing 3.19% after the security software company reported higher-than-expected fourth-quarter adjusted earnings and a fiscal first-quarter outlook above analyst expectations.

On the downside, United Natural Foods plunged 28.05% after the grocery wholesaler reported second-quarter profit that missed significantly, which it put down to rapidly rising inflation.

Reporting by Josh White for Sharecast.com.

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