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By Stephen Culp
NEW YORK (Reuters) - U.S. stocks struggled for direction and Treasury yields wavered on Wednesday as a barrage of robust economic data appeared to support Federal Reserve Chairman Jerome Powell's reassertion, in his second day of congressional testimony, that the central bank would continue to ratchet up policy rates until inflation subsides.
The major U.S. stock indexes oscillated between modest gains and losses in a subdued session, and the dollar paused its advance the day after a broad sell-off in the equities market driven by Powell's first day before a Congressional banking committee.
In his second day on Capitol Hill, Powell repeated his hawkish message that key interest rates would likely be raisedpotentially faster than previously anticipated, but stressed the central bank's policy decisions remain data dependent.
"Yesterday the Fed opened the door to more interest rate increases and did not close it today," said David Carter, managing director at JPMorgan Private Bank in New York. "There’s lots of uncertainty as to when the rate increase journey will end; even in a marathon you know it's over in 26.2 miles, but nobody knows where this finish line is, or if there is one more long hill."
Data released on Wednesday painted a picture of U.S. economic hardiness, and did very little to assuage those fears.
Job openings remain elevated, private payrolls beat consenusconsensuses, and demand for home loans increased, despite the ongoing upward trajectory of mortgage rates.
"If future increases are based on the economic data, the economic data continues to paint an unclear picture, which suggests the path of future rate increases is also unclear," Carter added.
Robust economic data could embolden the central bank to keep the Fed funds target rate higher for longer.
Financial markets have priced in an 80.8% likelihood of a 50 basis point hike to the key interest rate at the conclusion of the Fed's March meeting, up from about 30% at the beginning of the week, according to CME's FedWatch tool.
GRAPHIC: Odds surge for larger Fed rate hike in March - https://www.reuters.com/graphics/USA-RATES/FEDWATCH/lbpgglxbrpq/chart.png
The Dow Jones Industrial Average fell 137.28 points, or 0.42%, to 32,719.18, the S&P 500 lost 4.62 points, or 0.12%, to 3,981.75 and the Nasdaq Composite added 14.56 points, or 0.13%, to 11,544.89.
European stocks closed nominally higher as market participants weighed the strong U.S. data and downward revisions to fourth quarter euro zone economic growth.