Bloomberg) — Two Federal Reserve policymakers cautioned that recent stronger-than-expected readings on the US economy could push them to raise interest rates by more than previously expected.

In remarks Thursday, Governor Christopher Waller said that if payroll and inflation data cool after hot prints in January, “then I would endorse raising the target range for the federal funds rate a couple more times, to a projected terminal rate between 5.1% and 5.4%.”

“On the other hand, if those data reports continue to come in too hot, the policy target range will have to be raised this year even more to ensure that we do not lose the momentum that was in place before the data for January were released,” Waller said in remarks prepared for delivery at an event hosted by the Mid-Size Bank Coalition of America.

His virtual event, including the question and answer session following delivery of his prepared remarks, was canceled after a participant displayed pornographic content that was visible to viewers. The organizers said they had been the victim of “teleconferencing or Zoom hijacking.”

Waller’s speech followed comments by Atlanta Fed President Raphael Bostic, who told reporters that he still favored raising rates by 25 basis points in March but was open to lifting borrowing costs higher than he had envisioned if the economy remained so robust.

“I want to be completely clear: There is a case to be made that we need to go higher,” Bostic said. “Jobs have come in stronger than we expected. Inflation is remaining stubborn at elevated levels. Consumer spending is strong. Labor markets remain quite tight.”

Market reaction to Bostic was mixed. US stocks climbed on Thursday, with investors focusing on a comment that the central bank could be in a position to pause rate hikes sometime this summer. Still, yields across the Treasury market closed higher after rising earlier in the day on another batch of strong labor-market data. The focus now shifts to a report on the US services sector due Friday.

US central bankers have raised rates rapidly from near zero a year ago to a target range of 4.5% to 4.75%, including a series of four jumbo 0.75 percentage-point increases. In February, they stepped down to a 25 basis-point increase after a half-point move in December.

Officials next meet March 21-22, and by then they will have seen fresh reports on employment and inflation. Recent incoming data has been surprisingly strong: Employers added 517,000 new workers in January while inflation remains well above the central bank’s 2% target.

Waller said the payroll report, together with a decline in the unemployment rate in January to 3.4%, showed “that, instead of loosening, the labor market was tightening.”

Fed officials are discussing their evolving outlook, which may include holding the policy rate higher for longer than they expected when they published their last forecast in December.

That outlook showed a full percentage point of cuts by the end of 2024, according to the median projection. Officials will update their quarterly forecasts later this month.

Fed Chair Jerome Powell will have a chance to update lawmakers on the outlook when he heads to Capitol Hill next week to deliver his semi-annual testimony to Congress. He appears before the Senate Banking Committee on Tuesday and the House Financial Services Committee Wednesday.

By Yasin Ebrahim

Investing.com — The Dow closed flat Wednesday, as Treasury yields continued to advance on signs the disinflation in goods has run out of steam suggesting that the Fed’s rate-hike path may be steeper than expected. 

The Dow Jones Industrial Average gained 0.02%, or 5 points, and S&P 500 fell 0.46%, and the Nasdaq Composite was down 0.66%.

The February ISM Manufacturing PMI rose to 47.7 from 47.4, but a deeper dive into the data showed fresh signs of price pressures.

The prices paid index of the ISM manufacturing report “rose out of contraction to 51.3,” Jefferies said, pointing to signs that “the disinflationary trend in goods prices that was in place at the end of last year has run out of steam.”

Fresh signs of sticky inflation pushed Treasury yields sharply higher on bets that higher for longer interest rates are needed to cull inflation. The 10-year Treasury yield topped 4% for the first since November, keeping tech stocks in the firing line and extending the slump seen in February.

On the earnings front, Lowe’s Companies Inc (NYSE:LOW) fell nearly 6% after the home improvement retailer reported fourth-quarter revenue that missed Wall Street estimates and annual sales guidance that also surprised to the downside.

“[W]e note weaker than expected ongoing sales trends that are set to persist, a sharp decline in credit income achieved in the quarter, and a margin outlook that remains muted relative to history,” Goldman Sachs said in a note.

Electric vehicle stocks were also in focus as Tesla (NASDAQ:TSLA) kicks off its investor day, with the EV maker expected to lay out its Master Plan 3 and provide insights about its long-term growth plan.

“This next ‘Master Plan’ from Musk will give further insight into the broader strategic roadmap looking ahead and lays the foundation for the next decade for Tesla with the green tidal wave hitting globally on the shift to EVs,” Wedbush said.

Rival EV maker Rivian Automotive Inc (NASDAQ:RIVN) reported mixed fourth-quarter results as revenue missed estimates, and annual production also fell shy of Wall Street expectations, sending it down more than 18%.

In other news, 3M Company (NYSE:MMM), a major Dow component, gained more than 2% as data from the Department of Defense records showed the vast majority of claimants in Combat Arms earplug litigation had “normal hearing.”

By Yasin Ebrahim

Investing.com — The Dow fell Tuesday, wrapping up February with a monthly loss as surging rates battered stocks after a string of data pointing to underlying strength in the economy forced investors to price in higher for longer Federal Reserve interest rates.

The Dow Jones Industrial Average fell 0.65%, or 214 points, taking losses for February to about 4%. The S&P 500 fell 0.29%, and the Nasdaq Composite was down 0.10%.

Tech, which is down about 5% from its peak earlier this month, pared earlier gains despite a jump in Meta.

Meta Platforms (NASDAQ:META) rallied more than 3%, building on gains from a day earlier when the social media giant said it created a new product team to work on building generative AI tools to integrate into its products.

Zoom Video Communications (NASDAQ:ZM) closed up about 1% after the video conferencing platform reported quarterly results that beat Wall Street expectations on both the top and bottom lines, driven by growth in its enterprise segment.

Zoom’s guidance on revenue, however, fell short of estimates, prompting some on Wall Street to remain on the sidelines.

“While we view the guide as increasingly de-risked, we would prefer to see revenue re-acceleration via Online stabilization and an improving Enterprise mix (via Phone/Contact Center) before becoming more constructive,” Goldman Sachs said in a note.

Elsewhere on the earnings front, meanwhile, Target Corporation (NYSE:TGT) rose 1% following better-than-expected fourth-quarter results, though its annual guidance missed estimates keeping a lid on gains.

“[W]e’re planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment,” said Target chief executive Brian Cornell. 

Advance Auto Parts Inc (NYSE:AAP) was also in the ascendency, rising 3% after its Q4 results topped analysts’ forecasts, though the automotive aftermarket parts company struck a cautious tone on the year ahead.

“As we begin the year, we remain cautious surrounding the macroeconomic backdrop, including the potential for ongoing pressure on low to middle income consumers,” said Advance Auto Parts CEO Tom Greco.

In other news, Arconic Corp (NYSE:ARNC) surged more than 19% on reports the aluminum products maker has attracted buying interest from private-equity company Apollo Global Management.

On the economic front, meanwhile, consumer confidence in February fell to its lowest reading since November, pointing to signs strong consumer spending, which has underpinned strong growth so far this year, may be starting to slow.

“The data today continue to show that the Fed’s job is very tough. Consumers are only just barely starting to reign in their spending plans, but they still see good strength in the labor market,” Jefferies said in a note.

The broader market’s slip in February was pressured by a surge in rates as strong economic data forced investors to play catch-up and price in further Fed rate hikes that have pushed the 10-year Treasury yield close to 4%.

Investors will likely have to contend with choppy market activity in the weeks ahead amid inflation data, Fed policy, and geopolitical uncertainty that will continue to be the drivers “over the short run,” Janney Montgomery Scott said.

“The trading range for the S&P 500 still looks to be within 3850 – 3950 support and 4100 – 4200 resistance over the next few weeks in our opinion,” it added.