US stocks rise as investors digest Powell’s testimony

U.S. stocks edged higher on Wednesday as markets digested further remarks from Federal Reserve Chairman Jay Powell on the pace and duration of interest rate hikes to fight inflation.

The blue-chip S&P 500 rose 0.1% while the tech-heavy Nasdaq Composite gained 0.4%. The moves came after Powell spoke to lawmakers in Washington, where he stressed that no decision had been made on interest rates until the central bank’s meeting later this month.

“I emphasize that no decision has been made on this,” he told lawmakers.

It was the second day before Congress for the Fed Chairman, who on Tuesday said that the US central bank may be ready to reaccelerate the pace of interest rate hikes if the economy and inflation do not slow. The S&P 500 Tuesday fell 1.5%its biggest daily loss in a fortnight.

Analysts said stocks were more resilient than expected after the Fed’s downbeat assessment. “I was quite impressed and surprised that stocks held up,” said Veronica Clark, economist at Citigroup. “This could be a response to the data we have had so far, as stronger activity should be positive for equities – but investors can wait for data on payrolls and the consumer price index. They could still fall more.

Successive data releases since February have shown an economy struggling with persistent inflation despite a year-long campaign of higher interest rates. The latest was data released on Wednesday showing that private employers had added more jobs than expected in February – 242,000 according to ADP, against the 200,000 expected.

The data comes ahead of Friday’s monthly nonfarm payrolls and unemployment data, which will be watched very closely by investors.

The yield on the two-year Treasury note, which is highly sensitive to interest rate expectations, rose 0.05 percentage point to 5.06%.

On Tuesday, the two-year yield rose above 5% for the first time since 2007 as investors began to consider the possibility that the Fed could raise rates by half a percentage point at its next meeting, instead quarter of a percentage point that had been anticipated.

The yield on the US 10-year note rose 0.01 percentage point to 3.98%. Bond prices fall when yields rise.

Earlier in the day, the dollar index, which measures the greenback against a basket of six peer currencies, hit its highest level since early December, before giving up gains to trade roughly flat.

European stocks recouped most of their early losses in the afternoon. The region-wide Stoxx 600 closed up 0.1%, while London’s FTSE 100 also rose 0.1% and the CAC 40 in Paris lost 0.2%. The German Dax edged up 0.5% after stronger than expected industrial production data.

These moves followed steep declines in many of Asia’s largest markets. The Hang Seng in Hong Kong fell 2.4% and the Kospi in South Korea lost 1.3%.