Stock Market Today: Powell Reins in Rate-Hike Prospects, Sets Stocks Loose

After more than a week of international affairs monopolizing Wall Street's spotlight, attention shifted back to interest rates as Federal Reserve Chair Jerome Powell telegraphed the answer to one of investors' most pressing questions – and lit a fire under stocks.

In prepared testimony to the U.S. House Committee on Financial Services, Powell said he's "inclined to support a 25-basis-point rate hike" at the next Federal Open Market Committee meeting, set for March 15-16.

While Powell provided plenty of hedging language – saying the economic implications of Russia's invasion were "highly uncertain" and leaving the door open to a 50-basis-point increase in the Fed funds rate later in 2022 if rapid inflation persists – his comments largely shut down worries about a 50-basis-point hike in March that had contributed to recent equity selling.

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"I think we should assume one hike at every meeting this year, or seven total," says Kiplinger Economist David Payne. That adds up to the same total increase of 1.75 points previously forecast, but with slightly different timing.

"With inflation at a multi-decade high, the Fed is anxious to get off of a crisis footing," adds Bill Adams, chief economist for Comerica Bank. "The Fed will try to cool demand enough to get inflation under control, but not choke off the recovery."

Investors also cheered a better-than-expected private-sector employer report, with ADP announcing that payrolls increased by 475,000 in February, easily topping estimates for 375,000 – and more shockingly, that January's 301,000 payroll losses were revised to 509,000 additions.

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Peter Essele, head of portfolio management for Commonwealth Financial Network, noted that February's release showed small businesses (1-49 employees) experienced their first decline in jobs since April 2020, while large businesses (500+ employees) showed their third largest monthly job gain in 10 years.

"The dynamic in February is the extension of a trend that began in August 2021, where large business employment began to outpace small and medium business hiring in the recovery," he says. "The trend may reflect changing preferences in the labor force, with workers pivoting toward larger-scale businesses that potentially offer more benefits and higher wages."

Ninety-two percent of the S&P 500's components, and every one of its 11 sectors, finished in the green, pushing the index 1.9% higher to 4,386. The Dow Jones Industrial Average (+1.8% to 33,891) and Nasdaq Composite (+1.6% to 13,752) also closed well in positive territory.

Other news in the stock market today:

• The small-cap Russell 2000 had itself another solid day, up 2.5% to 2,058 to post its fourth gain in five sessions.
• A weekly decline in domestic crude inventories and reports that the Organization of the Petroleum Exporting Countries (OPEC) will continue to gradually increase output sent U.S. crude oil futures spiking nearly 7% to $110.60 per barrel – their highest settlement since May 2011. "I would expect the run higher in oil prices to continue through the course of 2022," says David Keller, chief market strategist at StockCharts.com, though he adds that "many energy names appear overextended and due for at least a brief pullback before resuming their uptrends."
• Gold futures fell 1.1% to settle at $1,922.30 an ounce.
• Bitcoin slipped 1.0% to $43,826.77. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.)
• Nordstrom (JWN) stock shot up 37.8% after the department store reported fourth-quarter earnings of $1.23 per share on $4.5 billion in revenue – beating analysts' estimates for earnings of $1.02 per share on $4.4 billion in sales. The company also noted improving sequential sales in its off-price division, Nordstrom Rack, and gave higher-than-expected guidance for fiscal 2022. Still, CFRA Research analyst Zachary Warring maintained a Strong Sell rating on the retail stock. "We do not believe JWN can achieve numbers anywhere near their guidance for fiscal 2022 after earnings per share of just $1.10 in fiscal 2021 after massive government stimulus and unprecedented pent-up demand. We would steer clear of shares that trade at 8.0x JWN's earnings-per-share guidance for fiscal 2023."
• Salesforce.com (CRM, +0.7%) reported solid fourth-quarter results Tuesday night, bringing in adjusted earnings of 84 cents per share on $7.3 billion in revenue. This exceeded analysts' estimates for 75 cents per share and $7.2 billion, respectively. CRM also guided for higher-than-expected revenue in both the current quarter and the full fiscal year and expects to see $1.5 billion in sales from Slack in fiscal 2023. "Given how deep its relationships are with its customers, Salesforce will continue to do well in the current financial environment," says Chris Rothstein, CEO and founder of Groove, the leading sales engagement platform for enterprises using Salesforce. "As economic uncertainty and inflation continue to drive down multiples for tech companies around the world, Salesforce is uniquely positioned to be able to take advantage of the situation."

Buying and Holding? Consider These 7 Funds

We've mostly spent the past few weeks exploring ways to either defend yourself from recent volatility or take advantage of the market's bobbing and weaving.

But for many buy-and-holders, the name of the game during times of tumult is … well, business as usual: Hold on to what you believe in, sell what you don't, buy when opportunity (and value) strikes.

One aspect of maintaining this kind of a portfolio is ensuring you have a solid portfolio core of diversified exposure to the market's basic flavors. We've long touted our Kiplinger 25 mutual funds and Kip ETF 20 to get the job done, but investors with fund-provider loyalty can often find all the tools they need within the very same family. Take American Funds parent Capital Group, which recently made a splash in the ETF world with six actively managed core-portfolio offerings.

However, buy-and-holders also may want to add "satellite" holdings – smaller positions meant to generate outperformance, and again, some fund families have a wealth of options available.

State Street Global Advisors, for instance, is one of the top ETF providers in the game via its SPDR family of funds, with nearly 140 ETFs available in the U.S. alone. We've winnowed down its wide selection down to seven SPDR ETFs that are ideally suited for buy-and-hold portfolios.