Stocks regroup as Powell follows up on remarks

Stocks steadied on Wall Street on Wednesday and closed with a mixed finish, a day after worries about interest rates sent them to one of their worst tumbles of the year.

The Standard & Poor’s 500 rose 5.64 points, or 0.1%, to 3,992.01. The Dow Jones industrial average fell 58.06 points, or 0.2%, to 32,798.40. The Nasdaq composite added 45.67 points, or 0.4%, to close at 11,576.00.

They were coming off a sharp drop Tuesday after the head of the Federal Reserve warned it could speed up its interest rate increases if pressure on inflation stays high. Such hikes can ease inflation by slowing the economy, but they also hit prices for stocks and other investments and raise the risk of a recession.

The Fed’s chair, Jerome H. Powell, said again Wednesday that pressure on inflation appears to be running higher than earlier expected. But he also emphasized much more strenuously than he did Tuesday that the Fed hasn’t made a decision yet on the size of its future increases.

He said policymakers want to see what reports say in the run-up to their next meeting later this month. That gave some solace to the market, which shuddered a day earlier on fears the Fed was set to increase the size of its rate hikes.

“We’re not on a preset path, and we will be guided by the incoming data,” Powell said.

One report he highlighted came out as he spoke Wednesday morning. It showed that the number of job openings advertised across the country last month remained higher than expected. Such data have been excruciatingly scrutinized on Wall Street because they can give a clue about where wages are heading for workers.

Strong wage gains are good for workers struggling to keep up with high inflation, but the Fed worries toohigh growth could cause a vicious cycle that pushes inf lation higher.

Although the higherthan-expected number of job openings could spook markets, the report also showed some signs of easing pressure, including fewer Americans quitting their jobs.

A separate report Wednesday suggested hiring is still stronger across U.S. private employers than expected. It could offer a sneak peek at what another one of the reports highlighted by Powell could say. The U.S. government’s more comprehensive report on hiring is scheduled to be released Friday.

Last month, a jaw-dropping number for that report revved up worries on Wall Street that inf lation may not be cooling as quickly and smoothly as hoped.

Besides last month’s gangbusters jobs report, other data showed surprising strength in such areas as spending by U.S. consumers and inflation itself at multiple levels. That caused stocks to drop and bond yields to jump in February.

Because of such strong data, Powell said rates will probably go higher than earlier expected. He also said the Fed may accelerate the pace of its hikes, a turnaround after it had just downshifted the size of its increases last month.

Expectations for a firmer Fed have been most clear in the bond market, where yields have shot higher in recent weeks.

The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, ticked up to 3.98% from 3.97% late Tuesday.

The yield on the two-year Treasury, which moves more on expectations for the Fed, rose to 5.05% from 5.02%. It’s near its highest level since 2007.

Yields on shorter-term Treasurys still remain far above those for Treasurys maturing many more years in the future. That’s an unusual occurrence and one that Wall Street sees as a fairly reliable signal for an upcoming recession.

Based on where traders are betting yields will be in the future, it appears the market is expecting inflation will continue to run hot and the Fed will quickly ramp up rates and then will reduce them only gradually afterward, said Jonathan Golub, chief U.S. equity strategist at Credit Suisse. He also said the bond market appears to be signaling that a recession could begin in August 2025.

For the moment, the economy looks resilient despite the interest rate hikes.