What’s driving markets

“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,” Powell said in prepared remarks to the Senate Banking Committee.

In February, the Fed raised the federal funds rate by 25 basis points, a more gradual pace, but the takeaway from his speech is a future 50 basis point hike could be in play. The Fed’s next meeting on interest rates is scheduled for March 21-22.

The Tuesday morning comments underscore Powell’s willingnesss to keep rates higher for longer, launching the start of a critical week for markets.

Powell will also be quizzed by the House of Representatives’ Financial Services Committee on Wednesday. The semiannual testimony comes days ahead of the February jobs report on Friday.

“Federal Reserve Chairman Powell’s Congressional testimony and the nonfarm payrolls report are the undoubted highlights of the week,” Richard Hunter, head of markets at Interactive Investor, said ahead of Powell’s remarks. Taken together, the two events will provide the latest update on the immediate past, present and future of the world’s largest economy and will be crucial in determining market sentiment,” Hunter added.

The S&P 500 index sits near the middle of the 3,800 to 4,200 range within which it has meandered for about four months, with equity investors seemingly able to absorb a recent lurch upwards in bond yields
TMUBMUSD10Y,
3.979%,
which has come after a spate of data showing resilient economic growth, which may force the Fed to keep borrowing costs higher for longer.

Some analysts are wary that the market remains vulnerable to any confirmation that interest rates may have to rise at a faster pace than hoped.

“For the most part, Fed speak recently has been chiefly hawkish; there has been no significant deviation from the 25bps path yet. But any such material twist would likely boost the USD higher and risk sentiment significantly lower,” said Stephen Innes, managing partner at SPI Asset Management.

[Mean]while sticking to the ‘higher-for-longer’, but in 25bps increments, it would help keep rates volatility contained and risk markets relatively supported,” Innes added.

U.S. economic updates set for release on Tuesday include January wholesale inventories at 10 a.m. and January consumer credit at 3 p.m.

Companies in focus

• Dick’s Sporting Goods Inc.
  DKS,
  +9.60%
  shares are up more than 7% in premarket trading after the retailer beat estimates on its fourth quarter results and offered a muscular full year earnings outlook. The national sports goods store had adjusted earnings per share of $2.93 versus a FactSet consensus of $2.88. The company’s “consistent performance” and “financial strength” will let it “increase the rate of investment in our business to fuel long-term growth opportunities, and also return significant capital to shareholders,” Dick’s Sporting Goods CEO Lauren Hobart said.

• Meta Platforms Inc.
  META,
  +1.13%
    shares up more than 2% amid a report that the parent company of Facebook and Instagram is eyeing another round of layoffs. Any extra trim to the workforce, as reported by Bloomberg News, would follow layoffs late last year of more than 11,000 employees.

• Shares of WW International Inc.
  WW,
  +42.76%,
  the company also known as Weight Watchers, are up more than 30% in early trading. The stock move comes after the company reported its fourth quarter results late Monday, also in the wake of Wall Street Journal reports that it was buying the telehealth platform Sequence.