Wall Street Today | Market Lets Loose and Drops While Waiting For Powell

Kim Forrest, founder and chief investment officer at Bokeh Capital Partners, said this week is reminiscent of last week's start. At that time, the big worry was what the Personal Consumption Expenditures Price Index -- the Federal Reserve's preferred inflation gauge -- would show at the end of the week. In-line numbers prompted relief and another leg higher for markets.

Now it's a new week, "and now we're back to freaking out," Forrest said in a phone interview. This time, the focal points are Federal Reserve Chair Jerome Powell's two-day testimony before Congress on Wednesday and Thursday and Friday's February jobs report.

Fed Chair Jay Powell will deliver testimony to Congress on Wednesday and Thursday, which, together with Friday's publication of the February nonfarm payroll report, may cement expectations regarding the likely trajectory of Fed policy.

According to the CME FedWatch tool, markets are pricing in a 97% probability that the Fed will leave interest rates unchanged at a range of 5.25% to 5.50% after its next meeting on March 20th. The chances of at least a 25 basis point rate cut by the subsequent meeting in May is priced at 23.7%, down from 62.3% just a month ago. The chances of at least a 25 basis point cut in June are priced at 65.1%.

According to 30-day Fed Funds futures, the central bank is expected to lower its Fed funds rate target to around 4.57% by December 2024. U.S. economic updates set for release on Tuesday include January factory orders and February ISM service sector activity, both at 10 a.m. Eastern.

"Given the persistent inflationary pressures, accommodative financial conditions, steady economic growth, and robust labor market conditions, it is reasonable to expect a more hawkish tone from Federal Reserve Chair Jerome Powell. However, it's challenging to envision a substantial departure from the recent guidance provided by other policymakers," said Stephen Innes, managing partner at SPI Asset Management.

Gold Futures climbed past $2,148 per ounce, the highest on record shortly after 8 am EST.

The metal's price is being supported by expectations that interest rates in developed countries will soon be lowered as inflation eases. Jerome Powell, the chair of the Federal Reserve, will begin two days of congressional testimony on Wednesday amid hopes he will offer firmer detail on when rate cuts will begin.

The record also comes amid a steady dollar and strong treasury yields, though yields eased early on Tuesday. Gold reached a "a fresh record closing high despite a run higher in yields, suggesting continued demand from momentum buyers and low short-selling appetite at a time of heightened geopolitical tensions along with market's continued optimism around the rate cut trajectory", Saxo Bank noted.

Still, treasury yields weakened early, bullish for gold since it offers no interest, with the US two-year note last seen paying 4.581%, down 2.9 basis points, while the yield on the 10-year note was down 5.5 basis points to 4.161%,