Markets were steady in midday trading on Wednesday as investors looked ahead to a speech by Federal Reserve Chair Jerome H. Powell, who is scheduled to make his final public remarks before the central bank meets next month to set interest rates.
The S&P 500 was little changed, after trading lower in the previous three trading sessions. The benchmark index is down about 17 percent since the beginning of the year.
On Wednesday afternoon at the Brookings Institution, Mr. Powell is expected to deliver a speech and answer questions about the outlook for inflation, jobs and the economy, with investors watching closely for hints that Fed policymakers could be about to let up on the pace of rate increases. Futures markets imply that traders expect Fed officials to raise rates by half a point at their Dec. 14 meeting, a slower pace than the three-quarter-point increases at each of the past four meetings.
Signs of potentially smaller rate increases have generally been cheered by the markets. “Every time we have a really excited rally about some point of optimism in the Fed’s speech, it delays the normalization process,” said Emily Bowersock Hill, the chief executive and founding partner of Bowersock Capital Partners. “It sets back their whole job, which is to get money out of the economy and bring inflation down.”
Earlier this week, James Bullard, president of the Federal Reserve Bank of St. Louis, said during an interview with MarketWatch that investors might be overly optimistic about the path of inflation. Investors are also awaiting the monthly jobs report, due on Friday, which will shed light on whether the labor market is cooling, reducing pressure on prices. On Wednesday, data on job openings suggested that the labor market remains strong but is gradually moderating.
The shift in expectations for Fed rate increases has been reflected in government bond yields, which have fallen steeply over the past month. The 10-year yield, which was trading above 4.2 percent a few weeks ago, currently sits at about 3.8 percent.
The prospect for more moderate rate increases has also hit the dollar, which in November is set to lose more than 4 percent of its value against a basket of major currencies, the biggest monthly decline in more than a decade. In part, that reflects how strong the dollar has become as the Fed raised rates aggressively this year. It remains more than 10 percent higher against the basket of major currencies than it began the year.
In Europe, the Stoxx 600 index gained 0.8 percent after the latest data on inflation in the eurozone came in lower than many economists expected, stoking the debate over whether the European Central Bank might ease back on the pace of rate increases at its next meeting, on Dec. 15.
In Asia, Hong Kong’s Hang Seng Index rose more than 2 percent and Japan’s Nikkei 225 fell slightly.
Oil prices gained for a third consecutive day, with West Texas Intermediate crude, the U.S. benchmark, rising to around $81 per barrel, a gain of roughly 3 percent.