Wall Street was set for a subdued open on Wednesday as investors worried about a potential recession after comments from Federal Reserve Chair Jerome Powell a day earlier fueled bets of aggressive monetary policy tightening.
Ahead of the crucial non-farm payrolls report on Friday, data showed U.S. private payrolls increased more than expected in February, pointing to continued labor market strength.
Powell told U.S. lawmakers on Tuesday the Fed would likely need to raise interest rates more than expected as it seeks to tame inflation, sending key U.S. stock indexes down more than 1%, with the benchmark S&P 500 (.SPX) logging its biggest percentage decline in two weeks.
Traders sharply increased their bets that the U.S. central bank will raise rates by 50 basis points later this month, with money market futures pricing in a 70% chance of such a move.
BlackRock’s chief investment officer of global fixed income, Rick Rieder, said the Fed could raise rates to 6% and keep them there for an extended period of time to fight inflation. Traders currently see the Fed funds rate peaking at 5.66% by September.
Powell will testify again before the House Financial Services Committee at 10:00 a.m. ET.
A closely watched part of the U.S. Treasury yield curve saw its deepest inversion in more than 40 years on Tuesday. Such an inversion is seen as a reliable recession indicator.
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