Stocks rose Thursday as traders processed comments from Federal Reserve Chairman Jerome Powell and awaited key employment data that could heavily influence the central bank’s next rate decision.
The Dow Jones Industrial Average gained 150 points, or 0.46%, attempting to snap a two-day losing streak. The S&P 500 and Nasdaq Composite added 0.4% and about 0.6%, respectively.
Investors received more news on the state of the labor market ahead of Friday’s closely watched nonfarm payrolls report. Jobless claims for the week ended March 4 rose more than expected, signaling that the labor market may be starting to slow. In retrospect, ADP’s payrolls report and JOLTs data on Wednesday suggested a resilient economy, heightening fears that the Fed needs more hiking to slow it.
Some economists, including those at Citi, expect a positive surprise to the upside come Friday’s payrolls data, following January’s blowout number. Strong jobs growth could mean bad news for the market, wrote strategist Alex Saunders in a Wednesday note to clients.
“Given that good news is bad news for markets, we think this would likely cause equities to sell-off further and support the case for an outsize Fed hike,” Saunders said.
Thursday’s moves come a day after Powell reiterated his warning message to lawmakers that the central bank may raise interest rates higher than previously expected. While the Fed chair emphasized that no decision has been made regarding the March meeting, traders are bracing for a larger-than-expected hike following a batch of strong economic data in recent weeks.
As of Thursday morning, traders were pricing in a roughly 78% chance of a 50 basis point increase, according to the CME Group’s FedWatch tool.