Stock Futures Dip Slightly as Powell and Yellen Prepare to Testify

28 Sep 2021 · 3rd Party Analysis

Stock Futures Dip Slightly as Powell and Yellen Prepare to Testify


In Summary

  • Futures on the major US stock indexes floated around the flat line early Tuesday
  • Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen to face Senate

US Stock Futures Dip in Pre-Market Trading Tuesday

Stock futures fell on Tuesday in pre-market hours as investors positioned their portfolios to meet today’s hearing in the Senate. Futures on the Dow Jones Industrial Average fell about 100 points ahead of the regular session today. S&P500 futures were down roughly half a percent. Nasdaq futures dropped about 1%.

Investors seem to be defensive as Federal Reserve Chairman Jerome Powell and Secretary of Treasury Janet Yellen are scheduled to testify before US Senate Committee on Banking.

Jerome Powell and Janet Yellen to Discuss the Economy

The hearing, titled “CARES Act Oversight of the Treasury and Federal Reserve: Supporting an Equitable Pandemic Recovery”, will include discussions about the main challenges for the US economy. Both Mr. Powell and Ms. Yellen will face tough questions from the committee. Some of these questions are likely to address the slowing growth of the US economy and the rapid pace of inflation.

Fed Chair Powell is likely to say that inflation is transitory and is expected to moderate as the economy moves forward. In his prepared remarks, Mr. Powell will once again mention the US central bank is getting ready to reverse its monetary support as soon as early November.

Jerome Powell faces the difficult task to convince committee members, and all market participants who will scrutinize his speech, that the overall economic progress remains robust.

Inflation Expected to Drop to 2%

“Inflation is elevated and will likely remain so in coming months before moderating,” Mr. Powell will say, according to his testimony. “As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors. These effects have been larger and longer-lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.”

The 2-percent goal, cited by the Fed chief, is one of the two main responsibilities of the Federal Reserve. Central bankers in the US have the task to maintain a steady 2% rise in consumer prices on an annualized basis. In addition, they must make sure the labor market is operating at maximum levels of employment. Presently, inflation has been persistently coming above 5% over the past few months.

Janet Yellen to Send a Warning to Congress

Treasury Secretary Janet Yellen will address the looming debt limit concerns. “It is imperative that Congress swiftly addresses the debt limit. If it does not, America would default for the first time in history,” she will say to Congress today, according to her prepared remarks.

Ms. Yellen will also warn that if the debt limit issue is not properly dealt with, it could lead to devastating consequences for the world’s largest economy. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”

Bitcoin Slides to $42K, Europe Trades in the Red

In other markets on Tuesday, the price of bitcoin slipped about 2% to levels near $42,000 per coin. Ether, the second-largest cryptocurrency, dipped below $3,000.

European stock indexes today turned negative. The pan-continental Stoxx 600 lost about 1% in the initial hours of the session.

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