Here are the most important news, trends and analysis that investors need to start their trading day:
U.S. stock futures fell Wednesday, pointing to an open that would give up most of the prior session's strong rally ahead of Day One of Federal Reserve Chairman Jerome Powell's economic testimony on Capitol Hill. The Dow Jones Industrial Average rose 641 points, or 2.15%, on Tuesday to kick off the holiday-shortened week. The S&P 500 and the Nasdaq gained 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 declared.
Powell is set to deliver the Fed's twice-yearly monetary policy report to the Senate Banking Committee on Wednesday and the House Financial Services Committee on Thursday. The Fed chief will give prepared remarks and face questions from lawmakers. Soaring inflation and whether the central bank is doing enough to stop it will no doubt be a major focus of the hearings. In a preview last week, the Fed said that fighting inflation is "unconditional." The Fed raised rates 75 basis points at its June meeting and forecast a hike of a similar magnitude at its next meeting in July.
Oil prices dropped 4% to around $105 per barrel on Wednesday, hours before President Joe Biden's expected afternoon announcement calling for a temporary suspension of the federal gasoline tax of 18.4 cents per gallon. However, a gas tax holiday faces significant opposition in Congress, including among many Democrats. Gas prices remain near $5 per gallon nationally heading into the thick of the summer driving season. Biden has pulled numerous levers to try to lower prices, including a record release of barrels from U.S. strategic reserves, production waivers, and pressuring OPEC countries and U.S. energy companies to boost output.
Traders rotated into bonds Wednesday, pushing the 10-year Treasury price higher and its yield down to around 3.2%. Bond prices and yields move in opposite directions. Last week's jump in yields to 11-year highs after the Fed's biggest interest rate hike since 1994 stoked demand for adjustable-rate mortgages. Those home loans are considered riskier because they generally offer lower fixed rates for five, seven or 10 years and then adjust to whatever the future current rates are, which can be higher. Mortgage applications to purchase a home rose 8% last week, though they were 10% lower than they were during the same week last year. Refinance demand fell 3% last week, and it was 77% lower than the same week one year ago.
Bitcoin on Wednesday held above $20,000, but it was trading lower. The world's biggest cryptocurrency on Tuesday fought its way back from Saturday's plunge to below $18,000, falling below the key $20,000 level for the first time since December 2020. At its low point Saturday, bitcoin was about 74% below its all-time high of more than $68,000 in November, which was the month of the Nasdaq's last record high. The overall crypto market capitalization is roughly $950 billion, according to price site Coinmarketcap, down from a peak of $2.9 trillion in November 2021.