Market Snapshot: U.S. stock futures struggle to recover as more comments from Fed’s Powell loom

What’s driving markets

U.S. stock market sentiment is again fragile after Federal Reserve chairman Jay Powell on Tuesday told the Senate Banking Committee that the central bank was prepared to increase the pace of interest rate hikes if data indicated it was warranted to damp inflation.

Powell will give further testimony on Wednesday, this time to the House Financial Services Committee, starting at 10 a.m. Eastern.

“The market has interpreted what he[Powell] said as being an indication that we may see higher rate hikes at the next meeting than we previously have expected, and that the terminal rate will be higher than what markets had priced in a month or so ago,” said Richard Flax, chief investment officer at Moneyfarm.

“You’ve seen the narrowing of the gap between market expectations and perhaps the Fed dot plot at the last release,” said Flax in a call.

Powell’s comments hammered government bonds, forcing short-term yields
TMUBMUSD02Y,
4.989%
to fresh four-decade highs, as the market increased bets that the Fed may hike rates by 50 basis points in two week’s time, and ultimately take rates as high as 5.65% by the autumn.

The sight of rising borrowing costs, and the prospects of a recession they may cause, pushed the S&P 500 index back below both the 4,000 level and its 50-day moving average on Tuesday.

In U.S. economic data, ADP said the private sector added 242,000 jobs in February. Economists polled by the Wall Street Journal earlier forecasted an increase of 205,000.

The data continues to support this narrative that the U.S. labor market has remained robust, said Moneyfarm’s Flax.

Meanwhile, the U.S. trade deficit widened by 1.6% to $68.3 billion in January. U.S. imports rose 3% to $325.8 billion in January, while exports were up 3.4% to $257.5 billion.

Other U.S. economic updates set for release on Wednesday include the JOLTS job openings survey to be published at 10 a.m. The Fed’s Beige Book of economic anecdote will be released at 2 p.m. All times Eastern.

Companies in focus

• Campbell Soup Co. 
  CPB,
  +0.69%
   stock was up 1.6% Wednesday after it beat Wall Street’s adjusted earnings estimate on a boost from higher prices for its food products. 

• Occidental Petroleum Corp.’s stock
  OXY,
  +3.29%
    rose 3.6% Wednesday after filings disclosed that Warren Buffett’s Berkshire Hathaway Inc. had upped its stake in the energy company by 6 million shares, taking its total to over 200 million shares worth more than $12 billion. Berkshire’s BRK.B, -1.85% stock edged up 0.1%.

• CrowdStrike Holdings Inc. shares
  CRWD,
  +1.87%
    increased over 6% after the security software company posted higher-than-expected fourth-quarter adjusted earnings and a fiscal first quarter outlook that also beat analyst expectations. D.A. Davidson also raised the stock’s price target to $165 from $145.

• Tesla Inc.’s stock
  TSLA,
  -3.97%
    stock moved down 2.1%, adding to the 3.2% drop in the previous session, which was part of a broader stock market selloff. Berenberg downgraded the electric vehicle maker from buy to hold, but raised the stock price target to $210 from $200, according to press reports.

• United Natural Foods Inc.
  UNFI,
  -28.88%
   plunged 33% toward a 19-month low in premarket trading Wednesday after the grocery wholesaler reported fiscal second-quarter profit that missed by a wide margin, as “rapidly accelerating inflation” took a bite out of results.