us stock indexes were sharply lower in the final hour of trading tuesday as investors digested federal reserve chairman jerome powells hawkish message to congress that the central bank will not rule out bigger interest rate hikes at the upcoming march meeting in order to tame stubborn inflation how are stocks are trading on monday the dow jones industrial average rose 40 points or 012 to 33431 the sp 500 increased 3 points or 007 to 4048 and the nasdaq composite dropped 13 points or 011 to 11676 the latest economic data have come in stronger than expected which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated powell said in prepared remarks to the senate banking committee on tuesday morning if the totality of the data were to indicate that faster tightening is warranted we would be prepared to increase the pace of rate hikes in february the fed raised the federal funds rate by 25 basis points a much slower pace after a halfpoint move in december and four jumbo 75 basispoint rate increases last year however powells testimony to congress on tuesday hinted that the fed may consider to reup the size of their next rate increase to halfofapercentagepoint at its next policy meeting on march 2122 following powells hawkish remarks fedfunds futures traders have priced in an over 68 chance of a 50 basis point rise according to the cme fedwatch tool traders had seen only a 30 chance of a halfpercentagepoint hike one day earlier and a 33 chance a month ago that would take the main policy rate target to between 5 and 525 the sizzling january employment and inflation data have led some investors to bet on a terminal fed funds rate of around 55 or even as high as 6 up from the fomcs average december projection of between 5 and 525 this repricing led to a sharp stockmarket selloff last month amid rising treasury yields see us stocks drop as fed chair powell testifies to congress brad conger deputy chief investment officer of hirtle callaghan  co said powells remarks were completely consistent with the message of being data dependent new information has definitely been that the economy has reaccelerated or the pace of deceleration has slowed down i think he had no choice but to flag that 50 basis point was back on the table so i am surprised that the market was surprised conger told marketwatch via phone the policysensitive twoyear treasury yield jumped to above 5 on tuesday afternoon that was the highest intraday level since july 2007 according to dow jones market data the ice us dollar index  a measure of the currency against a basket of six major rivals jumped 12 to 10560 and headed for one of its highest levels since january they fed re playing a game with a moving target because the inflation is not responding in the way they would have thought so the only option for them is to restrain some more and then see what happens conger said powell has a great way of smoothing over the rough spots i think what caught people by surprise is the unvarnished hawkishness rather than his comments where he can sometimes balance his hawkishness with something more market friendly steve sosnick chief strategist at interactive brokers ibkr said in a phone interview maybe some investors were growing complacent that the story line would be a gradual easing of interest rates but sosnick said powells stance is very much in line with data dependence that powell has been emphasizing that puts extra urgency on what the numbers reveal in februarys jobs report he said indeed powell said that there are two or three very important data releases to analyze before the time of the march meeting those are going to be very important in the assessment we have of this relatively recent data he said the semiannual testimony comes days ahead of the february jobs report on friday and the monthly inflation report next tuesday economists surveyed by the wall street journal expect february payrolls to have grown by 225000 while the unemployment rate remained unchanged at 34 from a month ago seewhat stockmarket investors want to hear when feds powell testifies before congress this week powell will also be quizzed by the house of representatives financial services committee on wednesday at 10 am eastern economic data releases tuesday include january wholesale inventories which declined for the first time since mid2020 the numbers matching the estimates of economist polled by the wall street journal indicate businesses are shrinking their amount of unsold goods to correspond with softening consumer demand reports on january consumer credit are slated for release at 3 pm this content was created by marketwatch which is operated by dow jones  co marketwatch is published independently from dow jones newswires and the wall street journal