Futures edge higher ahead of Fed Chair Powells testimony

(Reuters) – U.S. stock index futures edged higher on Tuesday, ahead of Federal Reserve Chair Jerome Powell‘s testimony before Congress that could shed more light on the central bank’s plans for raising interest rates.

The benchmark S&P 500 closed higher for a third straight session on Monday, as Treasury yields took a breather from their recent rally that was driven by expectations of the Fed holding interest rates at a higher level than many had expected at the start of the year.

Powell will testify before the Senate Banking Committee at 10:00 a.m. ET (1500 GMT), with investors focused on whether he remains confident about the Feds moves for bringing inflation towards its 2% target.

Powell said at his last press conference that a “disinflationary process” had begun, while cautioning the central banks fight against rising prices was not over.

Inflation data since Powells Feb. 1 remarks has shown prices have not fallen by as much as analysts were expecting, while the labor market has shown signs of resilience.

“We expect Mr. Powell to reiterate that further rate hikes are needed and, if the data were to continue to surprise to the upside, the peak rate would likely need to be higher than the central bank had previously expected,” Unicredit analysts said.

“In our view, the bar for re-accelerating the pace of rate hikes is high and the Fed would prefer a shallower path and to hold policy tight for longer, if necessary.”

The yield on two-year Treasury notes, which best reflects short-term rate expectations, hit its highest level since 2007 at 4.94% last week and has been hovering below that level. [US/]

Recent economic data and comments from Fed policymakers have prompted traders to reassess the path of rates, with money market futures pricing in a 28% chance of the central bank increasing rates by a bigger 50 basis points in March, according to CME Groups Fedwatch tool.

Traders see Fed fund rates peaking at 5.46% by September, from the current rate of 4.67%.

Data later this week is expected to show nonfarm payrolls increased by 200,000 in February, compared with the much stronger-than-expected 517,000 jobs reported in January.

At 5:07 a.m. ET, Dow e-minis were up 26 points, or 0.08%, S&P 500 e-minis were up 6.75 points, or 0.17%, and Nasdaq 100 e-minis were up 30.75 points, or 0.25%.

Among individual stocks, Rivian Automotive fell 6.0% in premarket trading after the electric automaker unveiled plans to sell bonds worth $1.3 billion.

Meta Platforms Inc gained 1.7% after Bloomberg News reported the company will cut thousands of jobs as soon as this week in a fresh round of layoffs.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Vinay Dwivedi)