US Stocks Await Fed Chair Powell’s Testimony

Federal Reserve Chair Jerome Powell will face Congress on Tuesday and Wednesday, which could spur the next move in US stocks.

SP-500-–-4H-ChartSP 500 – 4H Chart

The SP 500 is testing a resistance level at 5,578, with the potential for a pullback if a bearish mood takes over.

Jerome Powell will take questions on the economy and his handling of the interest rate cycle from US politicians.

On Friday, the US Labor Department’s jobs report said nonfarm payrolls rose by 206k jobs last month, beating the 191k forecast but slower than the 218k seen in May. The unemployment rate also unexpectedly rose to a two 1/2-year high of 4.1%.

“Get on with it. Friday’s employment report ought to firm up expectations of a September rate cut. Economic conditions are cooling and that makes the trade-offs different for the Fed,” said Neil Dutta at Renaissance Macro.

Last week, New York Fed President John Williams said that although inflation has recently slowed toward the bank’s 2% target, policymakers are still far from reaching their goal. “Inflation is now around 2.5%, so we have seen significant progress in bringing it down. But we still have a way to reach our 2% target on a sustained basis,” Williams said. “We are committed to getting the job done.”

US interest rate futures have priced in only a 6.7% chance of a 25 basis point rate cut at the Fed’s monetary policy committee meeting this month. Traders see a 69% probability of a 25 basis point rate cut at the September meeting.

US stocks have continued to grind higher based on the assumption that rates will come down. The latest inflation figures will also be released on Thursday, which could be an important week for US stocks.

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