U.S. stocks open lower as Powell testifies before congress, recession worries return to the spotlight

Those gains followed the worst week for the S&P 500 in two years, with the D ow and Nasdaq also suffering sharp losses.

What’s driving the market?

Investors are scanning comments from Fed Chairman Powell on Wednesday for more monetary policy clues as he testifies in front of the Senate Banking Committee starting at 9:30 a.m. Eastern Time.

“The American economy is very strong and well positioned to handle tighter monetary policy,” Powell said, in remarks prepared for delivery to a Senate Banking Committee hearing.

See: Powell says U.S. economy can handle the additional rate hikes that are coming

The pullback looming for Wall Street stocks though was unlikely to come as a surprise to analysts who were saying Tuesday that the rebound was nothing more than an oversold bounce. Asian equities largely ignored the U.S. rally and oil prices fell, as investors refocused on recession worries and expectations for continued tighter monetary.

Read: Why Tuesday’s bounce is likely to fizzle out and the stock market’s fortunes are unlikely to change soon

Some analysts on Wall Street warned clients at the start of the week that markets were still not correctly pricing in the likelihood of recession.

“The bear market will not be over until recession arrives or the risk of one is extinguished,” said Morgan Stanley’s chief U.S. equity strategist Mike Wilson in a note on Tuesday. He said another 15% to 20% drop should be expected, taking the S&P 500 index to 3,000.

Other Fed speakers are also lined up for Wednesday, including Chicago Fed President Charles Evans at 12:50 p.m. Eastern and Harker and Richmond Fed President Tom Barkin who will jointly appear on a panel discussion at 1:30 p.m. Eastern.

While stocks were set to fall, money was flowing into traditional havens such as bonds. The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.158%
fell 12 basis points to 3.161%, a day after its biggest jump in seven days. Yields and debt prices move opposite each other.

U.S. crude oil prices
CL.1,
-6.41%
dropped 6.6% to $102.29 a barrel, with Brent
BRN00,
-5.77%
down close to that at $107.67 a barrel, with both more than giving back Tuesday’s rise.

In addition to demand worries fueled by recession concerns, the White House on Wednesday said it is calling on Congress to suspend the federal gasoline tax for three months while also asking states to provide similar relief.

The federal government charges an 18 cent tax per gallon of gasoline and a 24 cent tax per gallon of diesel. A “gasoline tax holiday, while supporting consumers, would support demand, thereby prolong the period of tightness,” said Ole Hansen, head of commodity strategy at Saxo Bank, in a note to clients.

Which companies are in focus?

• Chef’s Warehouse Inc.
  CHEF,
  +3.58%
    shares rose 3.6% Wednesday after it raised its full-year guidance. The North American specialty foods provider expects sales in the range of $2.325 billion to $2.425 billion, up from a range of $2.13 billion to $2.23 billion previously.

• Shares of Athira Pharma Inc. 
  ATHA,
  -69.70%
  plunged 70% Wednesday after the company said an exploratory Phase 2 study assessing its experimental treatment for patients with mild-to-moderate Alzheimer’s disease did not meet the primary endpoint. 

How are other assets trading?

• The ICE U.S. Dollar Index 
  DXY,
  -0.23%,
   a measure of the currency against a basket of six major rivals, rose just under 0.1%.

• Gold futures 
  GC00,
  +0.38%
   went up 0.04% to $1,839.6 an ounce

• The Stoxx Europe 600 
  SXXP,
  -1.35%
   fell 1.4% while London’s FTSE 100 
  UKX,
  -1.37%
   declined 1.3%.

• The Shanghai Composite 
  SHCOMP,
  -1.20%
  fell 1.2%, while the Hang Seng Index HSI, -2.56% 
  HSI,
  -2.56%
  dropped 2.6% and Japan’s Nikkei 225 
  NIK,
  -0.37%
  slipped 0.4%.