Dow Jones, S&P 500, Nasdaq edge lower as markets take a breather ahead of Powell appearance

9.35am: Rising geopolitical tensions weigh on sentiment

US stocks opened mixed on Tuesday as investors held off making any big moves until after Fed chair Jerome Powell’s remarks at 11am Eastern Time which they hope will provide hints as to the central bank’s path of interest rate hikes.

Just after the market opened, the Dow Jones Industrial Average was down 120 points or 0.4% at 33,771 points, the S&P 500 was down 9 points or 0.2% at 4,102 points, while the Nasdaq Composite was flat at 11,890 points.

Swissquote Bank senior analyst Ipek Ozkardeskaya noted that rising geopolitical tensions were also taking a toll on sentiment. 

“Tensions around the Chinese spy balloon that was discovered last week and shut down didn’t do good to the Chinese stocks trading on American exchanges on the risk of escalation,” Ozkardeskaya said.

“Risk of escalation may include higher tariffs, shortly after news of tariff relief on Chinese goods, and it could lead to a potential revival of the US–China trade war.”

Ozkardeskaya said, with Powell speaking on last week’s blowout jobs report and US President Joe Biden to deliver his State of the Union speech this evening following the Chinese spy balloon incident, there was little to cheer about.

“What we know this week is that the Fed hawks are returning to the playground, mixed with escalating geopolitical tensions with China and also with Russia,” Ozkardeskaya said.

6.30am: More clarity sought on interest rates

Wall Street is expected to open flat to slightly higher after two days of losses as investors await more clarity on the direction of interest rates from Federal Reserve chair Jerome Powell.

Futures for the Dow Jones Industrial Average (DJIA) declined 0.1% in Tuesday pre-market trading, while those for the broader S&P 500 index rose less than 0.1%, and contracts for the Nasdaq-100 gained 0.1%.

Powell will be interviewed by billionaire businessman David Rubenstein, co-founder of private equity firm The Carlyle Group, at The Economic Club of Washington from 11.00am Eastern Time. His appearance comes after a stronger-than-expected non-farm payrolls report for January raised doubts that the Fed would soon halt interest rate hikes and even cut later this year. 

Against this backdrop, the DJIA closed 0.1% lower at 33,891 on Monday, the Nasdaq dropped 1% to 11,887, and the S&P 500 shed 0.6% to 4,111.

“Investors will parse Powell’s comments for his read on the red hot jobs data in the US Friday,” commented TickMill Group market analyst Patrick Munnelly.

“These come in light of last week’s post-rate announcement press conference when markets believed the Fed Chair gave the first clear acknowledgement of the start of the disinflationary process in play,” he added. “However, the employment data on Friday has pushed market pricing in favour of further rate hikes given the continued tightness in the US labour market.”

On the corporate calendar, The Carlyle Group reports quarterly earnings today, along with Chipotle Mexican Grill, Fortinet, Gartner, Nintendo, Omnicom and Royal Caribbean, among others.