Stocks close mixed after Powell's testimony and fresh jobs data

Stocks closed mixed on Wednesday following the release of conflicting jobs data and an uneventful day of Congressional testimony from Federal Reserve Chairman Jerome Powell.

New economic data showed that the number of job openings in the United States fell to 10.8 million in January, down from an upwardly revised 11.23 million in December.

Private businesses added more jobs than forecast in February, according to ADP. The payroll company estimated that 242,000 jobs were added last month, higher than the forecast of 200,000 and more than double the revised 119,000 added in January. ADP's jobs numbers are thought to be a predictor for government jobs numbers.

Government payroll numbers for February are due out on Friday morning. Investors and the Fed will be watching closely.

Chair Powell, meanwhile, wrapped up his two-day stint at the Capitol with a humdrum hearing in front of the House Financial Services Committee.

In corporate news, Merck shares fell about 2.7% after the company announced a deal with Opko health for the company's experimental Epstein-Barr virus vaccine.

Diversey Holdings, the maker of household products like Dove and Lysol, grew by nearly 40% after agreeing to be acquired by Solenis in a deal worth $4.6 billion.

The Dow was down 58 points, or 0.2%, in Wednesday trading.

The S&P 500 grew 0.1%.

The Nasdaq Composite was 0.4% higher.

Other notable moments from Fed Chair Jerome Powell's testimony on Wednesday included a question on the trillion-dollar coin, a proposed solution to the debt ceiling crisis where the president issues a $1 trillion platinum coin, deposits it with the Federal Reserve, and allows the government to keep paying its bills.

"There are no rabbits to be pulled out of hats here," said Powell when asked if he would accept the coin. "That would be a rabbit coming out of a hat."

Federal Reserve Chairman Jerome Powell wrapped up his second and final day of Congressional testimony with a relatively uneventful three-hour hearing in front of the House Financial Services Committee.

Markets remained relatively flat throughout the question-and-answer session. That stands in stark contrast to Tuesday's Senate Banking Committee hearing, when stocks plunged after Powell opened the door to higher interest rate hikes to fight sticky inflation.

On Wednesday, Powell attempted to calm investor fears, stressing no decision had yet been made about steeper rate hikes.

"If — and I stress that no decision has been made on this — if the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," he said.

The number of job openings in the United States fell to 10.8 million in January, down from an upwardly revised 11.23 million in December, the Bureau of Labor Statistics reported Wednesday as part of its monthly Job Openings and Labor Turnover Survey, or JOLTS. 

The consensus estimate from economists was for 10.5 million available positions in January, according to Refinitiv.

The January JOLTS report showed that hiring increased to 6.37 million from 6.25 million, layoffs surged to 1.72 million from 1.48 million, and quits dropped to 3.89 million from 4.09 million.

The continued imbalance between worker supply and demand means the US job market remained tight in January — and that's not what the Federal Reserve is looking for in its efforts to cool the economy. 

The Fed remains highly attuned to the monthly JOLTS report as the data can serve as a proxy for labor market demand. Fed officials have expressed concern that a tight labor market could keep upward pressure on wages and, in turn, inflation.

In January, there were nearly 1.9 available jobs for every job seeker. 

US stocks opened slightly higher on Wednesday as investors struggled for direction after commentary on Tuesday from Federal Reserve Chairman Jerome Powell about inflation rates and the state of the economy triggered a market selloff. 

Powell sent markets lower and 2-year Treasury yields to 15-year highs on Tuesday as he opened the door to larger rate hikes during testimony before the Senate Banking Committee. 

Richmond Fed President Thomas Barkin added to concerns on Wednesday morning. High inflation means the Federal Reserve still has more work to do, he said at an event in South Carolina.

Chair Powell is expected to testify Wednesday at 10 a.m. ET before the House Financial Services Committee, potentially triggering a new wave of market volatility. 

The bond market, meanwhile, is flashing a warning sign that generally predicts an incoming recession: The yield on the two-year US Treasury moved higher than the 10-year by the most in more than 40 years. That’s a signal that investors are more nervous about the immediate future than the longer term.

Tensions between the United States and China also continue to rage on, worrying investors. China announced a major government overhaul that aims to boost its technological self-reliance as a tech war with the United States intensifies.

The ADP employment report, meanwhile, highlighted a still-resilient US labor market — 242,000 jobs were added in February. That's much higher than estimates of 200,000 and more than double January's revised 119,000 jobs added.

Investors are waiting for US job opening numbers for January at 10 a.m. ET and government payroll numbers on Friday. 

In corporate news, shares of Occidental Petroleum were up 3.3% after filings showed that Warren Buffett's Berkshire Hathaway purchased more shares of the energy company this week. Shares of Stitch Fix, meanwhile, fell nearly 10% after the clothing company missed estimates on fourth-quarter earnings.

The Dow was up 36 points, or 0.1%, on Wednesday morning.

The S&P 500 grew by 0.1%.

The Nasdaq Composite was 0.2% higher.

Online inflation continued to cool in February, with prices falling for the sixth straight month, according to a new report from Adobe Analytics.

In a positive sign for inflation-weary consumers, prices slid last month by 1.4% year over year, and more than half the categories saw falling prices on an annual basis, the Adobe Digital Price Index showed.

The survey showed sharp drops in discretionary categories, including electronics (down 12.6% year on year), computers (16.4%) and toys (6.5%). Appliances were down 3.8% year on year and home and garden products fell 3.8%.

Grocery prices remain stubbornly high, up 11.4% year on year, but down from January’s 12.6% increase. It's the fifth consecutive month that grocery prices have slowed from their record high in September.

Online prices rose for 25 straight months during the pandemic as demand surged, before slowing in July, Adobe reported.

The slower pace of online inflation offers further evidence that the Federal Reserve's efforts to bring down overall prices are working, as consumers reduce their spending on goods.

Private companies added more jobs than forecast in February, according to payroll company ADP.

An estimated 242,000 jobs were added last month, higher than the forecast of 200,000 and more than double the revised 119,000 added in January.

The labor market is a keen focus for the Federal Reserve, with the ADP report seen as a proxy for the Labor Department's monthly employment report, which is set to be released Friday at 8:30 a.m. ET.

The bulk of the month's hiring occurred at mid-sized companies (50-499 employees) and large firms (500+ employees), according to the report. The job growth was fairly broad-based, with industries such as leisure and hospitality, services, and financial activities seeing some of the larger gains.

Pay growth for "job stayers" slowed to 7.2% in February, the slowest pace seen during the past 12 months. Wage gains for workers who changed jobs also ticked down from 14.9% in January to 14.3% last month.

“There is a tradeoff in the labor market right now,” said Nela Richardson, ADP's chief economist, in a statement. "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."

Stocks: US stock futures were slightly higher Wednesday after plunging Tuesday when Fed Chair Jerome Powell testified that rates would rise higher than expected. Powell is set to testify again Wednesday. Dow futures were up 30 points, or 0.1%. S&P 500 futures rose 0.1%. Nasdaq Composite futures were 0.1% higher.  

Fear & Greed Index: 47 = Neutral

Oil & gas: US oil prices were down 0.1% below $78 a barrel. Average US gas prices rose to $3.45 a gallon.

Federal Reserve Chairman Jerome Powell is set to deliver testimony to the House Financial Services Committee on Wednesday, the second day of his semiannual appearance before Congress to discuss the economy.

Wall Street is likely hoping for a calmer day, after Tuesday's testimony before the Senate Finance Committee brought sparks and a lot of market agita when Powell said interest rate hikes are "likely to be higher than previously anticipated."

That news sent investors reeling, with all three major indexes dropping steeply. Market expectations for a half-point rate hike spiked, shifting from a 30% probability to almost 70% by day's end, according to the CME FedWatch Tool. 

Investors will be looking Wednesday to see if the Fed chair doubles down on his hawkish tone and if he addresses the drop in financial markets.

Since the House tends to offer more spirited discourse than the Senate, there may be some fireworks during Powell's testimony. In his last appearance before the House, in June, he admitted the Fed had been "pretty wrong" in its assessment of when supply-side problems linked to Covid-19 would ease.

Adding to the potential drama: The highly anticipated January Job Openings and Labor Turnover Survey, or JOLTS, is set to be released at the exact time Powell takes his seat, at 10 a.m. ET. Lawmakers and investors alike will be tuning in to this key data point to determine if the white-hot US labor market showed any sign of cooling at the start of the year.

The job market has so far resisted the Fed's efforts to slow demand for labor: December's JOLTS data showed that despite mass layoffs in sectors like tech and media and the looming threat of recession, the number of available jobs unexpectedly rose to 11.01 million from 10.44 million in November.