Fed Chair Jerome Powell testifies in front of the Senate Tuesday, with futures pointing to a positive start on Wall Street. President Biden vows to continue the battle to return to the White House, while Boeing remains in the spotlight after a wheel comes off one of its aircraft.
1. Powell heads to Capitol Hill
The spotlight turns to Capitol Hill on Tuesday as Federal Reserve Chair Jerome Powell starts two days of a semi-annual Congressional testimony with an appearance before the Senate.
Economic data released of late has tended to point to cooling inflation, while the jobs market is also showing signs that months of tight policy is taking its toll.
This has resulted in raised expectations that the Fed will start cutting interest rates in September.
Powell insisted last week at the European Central Bank’s annual forum In Portugal that the Fed still needs more data to ensure inflation has moderated sufficiently, with Thursday seeing the release of the latest consumer inflation report.
Similar comments look likely, but Powell faces the tricky balancing act of making sure price pressures are restrained while not hitting the U.S. economy too hard and for too long with elevated interest rates.
2. Futures just higher; S&P 500 could fall 10% – Morgan Stanley
U.S. stock futures edged higher Tuesday, continuing the recent positive tone ahead of the release this week of key inflation data, testimony from Fed chief Jerome Powell and the start of the quarterly earnings reporting season.
By 04:00 ET (08:00 GMT), the Dow futures contract was 42 points, or 0.1%, higher, S&P 500 futures climbed 11 points, or 0.2%, and Nasdaq 100 futures rose by 66 points, or 0.3%.
The broad-based S&P 500 index and the tech-heavy Nasdaq Composite closed Monday at record levels on increasing confidence that the Federal Reserve will soon start to ease up on monetary policy, while the blue chip Dow Jones Industrial average ended marginally lower.
Attention Tuesday will be on the start of Federal Reserve Chair Jerome Powell two-day testimony on Capitol Hill–to the Senate today–with investors seeking clues as to when the central bank will start cutting interest rates.
Yet, despite the current positive tone, a decline of 10% in the benchmark S&P 500 stock index before the U.S. presidential election in November is “highly likely,” Morgan Stanley Chief Investment Officer Mike Wilson said in an interview on Monday with Bloomberg TV.
Among the reasons for a decline are uncertainty over how swiftly the Federal Reserve will bring interest rates down from nearly two-decade highs and falling pricing power on the part of companies, increasing the likelihood of disappointing earnings results, he said.
3. Biden stays in presidential race
U.S. President Joe Biden vowed to stay in the presidential race on Monday, as he attempted to dismiss the concerns about his mental fitness caused by a poor debate outing against Republican Donald Trump at the end of June.
In a letter he sent to fellow Democrats, which he posted on X.com, Biden said he remains “firmly committed to staying in this race, to running this race to the end, and to beating Donald Trump.”
He repeated the message after calling into MSNBC’s Morning Joe program.
“The bottom line here is that I’m not going anywhere. I am not going anywhere. I wouldn’t be running if I didn’t absolutely believe that I am the best candidate to beat Donald Trump in 2024.”
However, there remains a great deal of uncertainty with the House and Senate back into session for the first time since the debate.
There’s still a 40% chance Biden will not seek reelection, according to Stifel.
The financial services company has released a note that calls this a “make or break week” for the president’s campaign as Congress returns from its Fourth of July recess.
4. Boeing back in spotlight
A United Airlines (NASDAQ:UAL) jet lost a landing-gear wheel on Monday when it took off from Los Angeles but landed safely in Denver, its planned destination.
The wheel was from a Boeing 757-200, and follows a United Boeing 777-200 jet losing a tire mid-air following takeoff from San Francisco in March.
The Federal Aviation Administration also said on Monday it is requiring inspections of 2,600 Boeing 737 airplanes because passenger oxygen masks could fail during an emergency due to a retention strap.
Boeing (NYSE:BA) only recently agreed to plead guilty to a criminal fraud conspiracy charge to resolve a U.S. Justice Department investigation into two 737 MAX fatal crashes.
5. Crude slips as Beryl causes little damage
Crude prices edged lower Tuesday, after Hurricane Beryl caused less damage to a key U.S. oil-producing region than expected, easing concerns over supply disruption.
By 04:00 ET, the U.S. crude futures (WTI) fell 0.5% to $81.91 a barrel, while the Brent contract dropped 0.4% to $85.39 a barrel.
“The worst of Hurricane Beryl appears to have passed and now the market awaits an assessment of damage to energy infrastructure along the Texan coast. Early indications suggest that most energy infrastructure has come through unscathed,” said analysts at ING, in a note.
Market participants are also keeping an eye on the situation in the Middle East, as hopes of a possible ceasefire deal in Gaza, potentially reducing worries about global crude supply disruption, hit crude prices on Monday.
The American Petroleum Institute releases its estimates of weekly crude inventories later in the session, with a draw expected given the summer driving season.