All Eyes And Ears On Chair Powell Today

Many traders are no doubt rewarding the recent rally and booking profits but there are few signs that investors are jumping ship out of fear. It’s worth noting that yields on the 10-Treasury note fell to the lowest levels in a month yesterday. That was likely influenced by softer-than-expected results from the ISM Non-Manufacturing Index for February. Notably, the “prices paid” component pulled back substantially after an outsized surge in January, which bulls see supporting their view that “hot” data last month may have been a fluke. Powell’s testimony before the House Financial Services Committee today and the Senate Banking Committee tomorrow both begin at 9 a.m. CST.

Expectations

Most expect Powell to stick to the central bank’s recent script that rates cuts are likely later this year but policy will remain data dependent. Policymakers have indicated that they anticipate three 25 basis point cuts this year but officials have avoided providing a specific timeframe.

Some Wall Street insiders think Powell could call out what some see as “over-exuberance” in some parts of the market, particularly AI-related tech stocks and bitcoin.

While the central bank is strongly inclined to avoid cutting rates too soon and risking inflation reigniting, Fed officials are also not keen on rate cuts fueling what some fear is a brewing “bubble” in stock market.

In the years following the financial crisis of 2007-08, such warnings might have given traders some pause but Wall Street in recent years has mostly brushed off Fed scoldings.

Data to Watch

Today also brings ADP’s private payroll results for January, which most expect to show around +150,000 jobs added versus +107,000 in January. The official February Employment Situation on Friday is expected to show a gain of +190,000 jobs.

Investors today will also be digesting the Job Openings and Labor Turnover Survey for January and the preliminary read on Wholesale Inventories.

On the earnings front, today’s highlights include Abercrombie & Fitch, Campbell Soup, Foot Locker, Grubhub, and Victoria’s Secret. Bottom line, Fed Chair Powell’s testimony and overall tone today and tomorrow will heavily influence the market.

All eyes and ears on Chair Powell… if he comes across as more hawkish than the bulls have been thinking we could see some take a few steps backward. If he sounds or seems more dovish, the bulls will be back to posting new all-time highs.