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US equity markets are looking to win back some of the declines over the last two days, but how the trading day fares will hinge on Fed Chair Powell’s comments as he begins two days of back-to-back testimony in Washington. Based on what we saw in yesterday’s February Service PMI reports -- continued strength in that part of the economy and selling prices continuing to rise -- and other recent data, the odds Fed Chair Powell will double down on a slow path to rate cuts are high. Powell's choice of words and tone, especially during the Q&A portion of the testimony, will be what the market focuses on the most. We highly doubt Powell will tip the Fed's hand, but the more forceful his remarks are about needing to stay the course until the fight on inflation is assured, the more likely we will see rate cut expectations slip further.

That could lead to yesterday’s market sell-off continuing today, but we will also have to see what this morning's ADP Employment Report says about job creation during February. Consensus expectations are for 150,000 jobs during the month, up from 107,000 in January. A stronger print would bolster the case for a slow-walking Fed while an inline print won't do much to change that expectation. We say that because a print near 150,000 jobs would be above the trailing six-month average of 125,000 jobs created, according to ADP's data.

When we read the data, we'll also look at the wage data it brings. In the January report the median annual pay increase for job stayers was 5.2% while for job changers it was 7.2%. Those figures have been inching lower over the last several months, but if that progress slows or those figures rebound higher, it would be another sign that rate cut timing is likely to be pushed off even further.

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