Wall Street Stalls Out Ahead of Powell Testimony

NEW YORK (AP) -- Stocks are holding relatively steady in early Tuesday trading, as Wall Street stays in neutral following its jarring, roller-coaster start to the year.

The S&P 500 was virtually unchanged after barely moving the day before. The Dow Jones Industrial Average was down 18 points, or 0.1%, at 33,412, as of 9:45 a.m. Eastern time, while the Nasdaq composite was 0.2% higher.

Most of Wall Street's wildest action this year has been in the bond market, and yields there were also holding steady. More movement could be ahead later in the day after the chair of the Federal Reserve, Jerome Powell, begins his scheduled testimony on Capitol Hill.

It will be Powell's first appearance before Congress in nine months, and he'll be talking about what the Fed is doing to get the nation's high inflation under control. After seeming to be on a steady decline since peaking last summer, reports on inflation last month came in surprisingly hot. So did a suite of other data on the economy, including the job market and spending by U.S. consumers.

That raised fears on Wall Street that inflation is remaining stickier than feared and that the Fed will have to raise interest rates higher than earlier thought. Higher rates can drag down inflation because they slow the economy, but they hurt prices for stocks and other investments. They also raise the risk of a recession later on.

Since getting last month's blowout jobs report and other surprisingly strong data, Wall Street has largely abandoned hopes that percolated early this year for a possible cut to interest rates later in 2023. It also upped its forecast for how high the Fed will ultimately take rates before pausing.

That's been most clear in the bond market, where the yield on the 10-year Treasury topped 4% last week and hit its highest level since November. It helps set rates for mortgages and other important loans.

On Tuesday, it dipped to 3.95% to from 3.96%.

Comments by several Fed officials recently have caused big swings for markets, as traders try to get ahead of the Fed's next moves. But many analysts don't expect Powell to offer fireworks on Tuesday and Wednesday in his scheduled testimony.

That's because he and the Fed don't yet have a few data points that will surely help shape their decision making ahead of their next meeting on interest rates later this month.

On Friday will come the U.S. government's monthly jobs report. Within that, most of the attention will be on how high wages are going for workers. The fear at the Fed is that too-strong gains could lead to more upward pressure on inflation.

Then two reports next week will give updates on how high inflation remains at both the consumer and at the wholesale levels.

The Fed has already raised its key overnight rate to range of 4.50% to 4.75%, up from basically zero at the start of last year. It has slowed its pace of increases, down to 0.25 percentage points last month from earlier hikes of 0.50 and 0.75 points.

The widespread bet on Wall Street has become for the Fed to hike rates by at least three quarters of a percentage point more.

The big shifts among investors about where inflation and the Fed are heading have led to sharp movements for markets. In January, stocks rallied and bond yields eased as hope blossomed that inflation would cool and get the Fed to take it easier on interest rates. Then, last month's torrent of strong data dashed those expectations and sent stocks falling and bond yields jumping.

On Wall Street Tuesday, WW International, better known as WeightWatchers soared after saying it's getting into the prescription weight loss business with the purchase of telehealth platform Sequence. WW will pay $106 million for Sequence, which served about 24,000 members across the U.S. as of February.

Shares of WW jumped 20.7%.

Stock markets abroad were mixed.

In Australia, the country's central bank decided to raise its key rate by a quarter of a percentage point to 3.6%. It said that although global inflation remains high, inflation in Australia is starting to subside. The hike was expected.