Here are the top news, trends and analysis that investors need to start their trading day:
1. Wall Street is poised to give up many of its gains on Tuesday
Traders on the floor of the New York Stock Exchange, June 16, 2022.
U.S. stock futures slipped on Wednesday, suggesting an open that would give up most of the previous session’s strong rally ahead of Federal Reserve Chairman Jerome Powell’s first day of economic testimony on Capitol Hill. The Dow Jones Industrial Average rose 641 points, or 2.15%, on Tuesday to begin the abbreviated week during the holiday. The S&P 500 and Nasdaq are up 2.45% and 2.51%, respectively. Tuesday’s bounce came after the S&P 500 had its worst week since March 2020, the month the Covid pandemic was announced.
2. It’s day one of Fed Chairman Powell’s economic testimony
Federal Reserve Chairman Jerome Powell speaks to reporters after the Federal Reserve raised its target interest rate by three-quarters of a percentage point to stem the turbulent rise in inflation, during a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, United States June 15, 2022.
Elisabeth Frantz | Reuters
Powell is due to deliver the twice-yearly Federal Reserve monetary policy report to the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday. The Fed chair will deliver prepared remarks and face questions from lawmakers. There is no doubt that spiraling inflation and whether the central bank is doing enough to stop it will be the main focus of the hearings. In a preview last week, the Fed said the fight against inflation was “unconditional”. The Fed raised interest rates by 75 basis points at its June meeting and forecast a hike of the same size at its next meeting in July.
3. Biden is expected to call for a temporary suspension of the federal gas tax
Fuel prices at a Chevron gas station in San Francisco June 9, 2022.
Bloomberg | Bloomberg | Getty Images
Oil prices fell 4% to about $105 a barrel on Wednesday, hours before President Joe Biden’s expected afternoon announcement calling for a temporary suspension of the 18.4-cents-a-gallon federal gasoline tax. However, the gas tax credit faces significant opposition in Congress, including among many Democrats. Gas prices remain near $5 a gallon nationwide as the summer driving season approaches. Biden withdrew several means to try to lower prices, including a record-barrel release of US strategic reserves, production waivers, and pressure on OPEC countries and US energy companies to increase production.
4. Higher interest rates boost demand for higher risk adjustable rate mortgages
Traders traded in bonds on Wednesday, pushing the price of the 10-year Treasury note and its yield around 3.2%. Bond prices and yields move in opposite directions. Yields jumped last week to 11-year highs after the Fed’s biggest rate hike since 1994 spurred demand for adjustable-rate mortgages. These home loans are riskier because they generally offer low fixed rates for five, seven or 10 years and then adjust to future current rates, which can be higher. Mortgage applications to buy a home rose 8% last week, although they were 10% lower than they were during the same week last year. Refinancing demand fell 3% last week, and was 77% lower than the same week a year ago.
5. Bitcoin settles above the key level that fell below Saturday
Bitcoin settled above $20,000 on Wednesday, but it was trading lower. The world’s largest cryptocurrency on Tuesday battled its way back from Saturday’s dip below $18,000, slipping below the $20,000 key level for the first time since December 2020. At its lowest level on Saturday, bitcoin was nearly 74% below its Its highest level ever. From $68,000 in November, the month the Nasdaq last hit a record high. The total market capitalization of cryptocurrencies is around $950 billion, according to pricing website Coinmarketcap, down from a peak of $2.9 trillion in November 2021.
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