Two key reports — retail sales and the Consumer Price Index — may provide more clues Wednesday than Janet Yellen about how soon the Fed could raise interest rates.
The Fed Chair testifies for a second day, this time before the House Financial Services Committee, on the economy and policy. Her comments before the Senate Banking Committee on Tuesday triggered a bond market rout and helped drive stocks to new highs.
Stock futures were mixed, the dollar was firmer and Treasury yields were slightly higher ahead of the testimony. Besides Yellen, traders will keep watch on the drama surrounding former national security adviser Michael Flynn and reports about Trump campaign contacts with Russian intelligence.
Traders are watching to see whether Yellen retains her hawkish tone or even is more aggressive in comments Wednesday. Yellen said Tuesday that the Fed will likely need to raise rates at an upcoming meeting and that "waiting too long for accommodation would be unwise."
During the testimony, she was pressed on rate hike timing. "I can't tell you exactly which meeting it would be. I would say every meeting would be live," said Yellen.
Leading up to the testimony, markets were ruling out a March hike but the odds moved up slightly after she spoke. Goldman Sachs economists, for instance, raised their rate hike odds for March to 20 percent from 15 percent.
"She certainly wanted to give herself the option of going in March if the data does reflect that. I think she might be thinking that the market was a little too pessimistic on that potential," said Mark Cabana, Bank of America Merrill Lynch head of U.S. short rate strategy.
Consumer inflation, measured by CPI, has been picking up, and while it's not the preferred Fed inflation gauge, a jump in inflation could give the market more reason to speculate on an earlier rate hike. Fed watchers currently expect the next hike in June, and many see just two hikes this year, while the Fed forecasts three.