Wall Street was not relieved by Jerome Powell's testimony to US lawmakers, especially after another round of jobless claims came in above expectations, bolstering bets that the Fed will be forced to remain hawkish in the coming months.
Even after the Fed chairman's assurance that no decision has been made on the size of a rate increase in March and that the central bank is not seeking to cause a recession, stocks swung back and forth. For example, Powell reiterated that officials are likely to take rates higher than previously anticipated, and that they may move faster if necessary.
Policymakers will be looking at three key indicators in Friday's jobs report: payrolls, wage gains, and the unemployment rate. If they all point to a strong labor market — perhaps even slightly stronger than expected — that will pave the way for a larger hike, likely reducing the suspense in the inflation reports due next week.