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Powell said on Tuesday he expects 2023 to be a year of
"significant declines in inflation".
However, he also said the battle against inflation will take
quite a bit of time, acknowledging that interest rates may need
to move higher than expected.
"The underlying worries about just how high rates will have to
go are bubbling to the surface again, following yesterday's
exuberance over indications that disinflationary forces were
taking hold," Susannah Streeter, markets analyst at Hargreaves
Lansdown, said.
"The see-saw sentiment is set to continue as investors wait for
fresh data to filter through, which they hope will throw fresh
light on the direction of Fed policy."
Powell's comments, which came after a strong jobs report on
Friday, pushed Wall Street's main indexes higher on Tuesday,
with the S&P 500 up 1.29% and the Nasdaq adding 1.90%.
U.S. equities have had a strong start in 2023, after taking a
hit last year, led by battered megacap growth stocks on optimism
the Fed will temper its aggressive rate hikes.
Microsoft Corp climbed 1.9% in premarket trading after the tech
giant said it was revamping its Bing search engine and Edge Web
browser with artificial intelligence.
Traders will closely monitor comments from a slew of Fed
officials later in the day for more hints on the central bank's
path of future interest rate hikes.
Money market participants see the Fed's terminal rate at 5.14%
by July, with a 98.5% chance of a 25-basis point rate hike in
March.
Walt Disney Co, CVS Health Corp, Uber Technologies Inc and Yum
Brands Inc will report their quarterly earnings later in the
day.
So far, more than half of the S&P 500 companies have reported
quarterly earnings, with 69.1% of them beating expectations,
according to Refinitiv. Still, analysts expect fourth-quarter
earnings to decline 3.1%.
At 5:50 a.m. ET, Dow e-minis were down 55 points, or 0.16%, S&P
500 e-minis were down 10.25 points, or 0.25%, and Nasdaq 100
e-minis were down 26 points, or 0.20%.
(Reporting by Shubham Batra and Ankika Biswas in Bengaluru;
Editing by Shounak Dasgupta)
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