S&P 500 Struggling to Find Direction Ahead of Powell’s Speech on Wednesday

The major U.S. stock indexes are expected to open mixed on Tuesday following positive developments in China overnight and U.S. housing data that showed a further slowing in home prices.

Investors Pinning Hopes on Early Exit from COVID-related Curbs in China

The broad-based S&P 500 and NASDAQ Indexes reversed early weakness on Tuesday after China reported a decline in new COVID-19 infections for Nov. 28. The country said local infections, mostly asymptomatic, totaled 38,421, down from a record high of 40,052 reported for Sunday, according to CNBC calculations of Wind Information data.

The last time the daily case count fell from the prior day was on November 19, the data showed.

Additionally, there was no indication of new protests on Monday. Over the weekend, students and groups of people across China held public demonstrations to protest the country’s stringent zero-COVID policy.

This news was enough to underpin stocks overnight on the hopes that China would end its COVID restrictions sooner-than-anticipated.

US House Annual Prices Slow Again in September

U.S. single-family home prices slowed further in September as higher mortgages eroded demand, closely watched surveys showed on Tuesday.

The S&P CoreLogic Case Shiller national home price index dropped 0.8% month-over-month in September. Monthly house prices fell in July for the first time since late 2018.

House prices rose 10.6% year-on-year in September, slowing from August’s increase of 12.9%.

Fed Rate Hike Chatter Keeping Lid on Prices

Stocks are being capped by Monday’s hawkish comments from St. Louis Fed President James Bullard and New York Fed President John Williams.

Bullard said that the Fed needs to raise interest rates quite a bit further, while Williams said the U.S. central bank needs to press forward with rate rises but did not say how fast it will need to boost short-term borrowing costs.

Short-Term Outlook

The choppy price action suggests investors are keeping their powder dry and shifting their focus squarely on Fed Chair Jerome Powell, who is due to speak at a Brookings Institution event on Wednesday.

Investors will be listening to the tone of Powell’s speech to see if he has shifted to less-hawkish like last week’s Fed minutes implied, or if he remains the same hawk as he was just weeks ago.

Also controlling the trade and helping to keep prices in a range is general uncertainty ahead of Wednesday’s ADP National Employment report and Friday’s U.S. Labor Department’s Non-Farm Payrolls data. Both could provide further clues on the Fed’s policy plan.