US Stocks Poised For Nervous Start As Fed Chair Powell Heads To Capitol Hill

Trading in the index futures suggests a cautious start on Wall Street on Wednesday as traders look ahead to Federal Reserve Chair Jerome Powell’s Congressional testimony. The market could also move to speeches by other Fed officials and the oil’s recovery. FedEx Corp.‘s FDX disappointing guidance could stir some anxiety about the economy.

Cues From Tuesday's Trading:

Stocks ended Tuesday's session on a negative note, as profit-taking led to weakness. The major averages came into the session just shy of their multi-month highs. After opening lower, the indices saw further selling in the morning. Although the major averages came off the day's lows, they ended firmly in the red, as traders looked ahead to the next big catalyst that can reignite the rally.

Among economic data, housing starts rose more than expected in May, suggesting that new home construction is ramping up.

"Millennial demand for condos and apartments will support construction activity in the coming months. And even more importantly, the increased supply of multi-family dwellings should suppress rent prices by the end of the year, giving the Fed leeway to do a true pivot on rates, said Jeffrey Roach, chief economist at LPL Financial.

Energy stocks fell by the most amid oil's retreat, while real estate, material, utility and consumer staple stocks also fell sharply.

U.S. Indices’ Performance on Tuesday

Analyst Color:

Powell's testimony on Capitol Hill is a key catalyst for the week, as his comments will be parsed for any indication of where he stands on the debate for further hikes, said Quincy Crosby, chief global strategist at LPL Financial.

With sentiment still "bullish" and markets overbought, Powell could provide a modicum of support to the market's advance, but if he suggests that he's in the hawkish camp, markets may need to continue to unwind gains until a more viable catalyst emerges.

The market could also be wary of the Treasury Department beginning to replenish its General Account with the sale of Treasury securities, which could drain liquidity from the market.

"Rebalancing of pension and sovereign wealth funds also have the attention of financial markets as repositioning could involve the selling of equities, with a reallocation towards bonds," he added.

Futures Today

Futures Performance On Wednesday

In premarket trading on Wednesday, the SPDR S&P 500 ETF Trust SPY edged up 0.03% to $437.33 and the Invesco QQQ ETF QQQ fell 0.04% to $366.76, according to Benzinga Pro data.

Upcoming Economic Data:

The Mortgage Bankers Association is scheduled to release its mortgage application volume data at 7 a.m. EDT. Data for the week ended June 9 showed mortgage applications volume increasing 7.2% week-over-week, as mortgage rates declined for a second straight week.

Powell is due to testify before the House Financial Services Committee at 10 a.m. EDT.

Senate nomination hearings for Fed Governors Philip Jefferson and Lisa Cook and nominee Adriana Kugler are also scheduled for 10 a.m. EDT.

Chicago Fed President Austan Goolsbee will speak at 12:25 p.m. EDT.

The Treasury will auction 20-year bonds at 1 p.m. EDT.

See also: Best Futures Brokers

Stocks In Focus:

• FedEx Corp. fell more than 2.8% in premarket trading after the company issued a tepid forecast.
• La-Z-Boy, Inc. LZB slid over 5% following the release of the quarterly results.
• Chinese EV startups Nio, Inc. NIO, XPeng, Inc. XPEV and Li Auto, Inc. LI rallied after China chose to extend one of the sops it was giving to green-energy vehicles.
• Patterson Companies, Inc. PDCO and Winnebago Industries, Inc. WGO are due to report their quarterly results ahead of the market opening.
• KB Home KBH and Steelcase, Inc. SCS are the key names that report earnings after the market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil futures gained 0.24% to $71.36 in early European trading on Wednesday. The commodity fell 1.14% on Tuesday.

The yield on the benchmark 10-year Treasury note edged up 0.011 percentage points to 3.738%.

Major Asian markets ended Wednesday's session on a mixed note, with the Chinese and Hong Kong markets declining sharply. European stocks were holding up amid nervousness in late-morning trading.

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