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Stocks are heading for a lower start as investors look nervously ahead to Federal Reserve Chair Jerome Powell's bi-annual testimony before Congress. The market will be watching closely for cues for the direction of monetary policy and interest rates. His appearance comes a week after the Fed interest rate decision, where the central bank skipped a hike after raising interest rates for the past 10 meetings.

US futures

Dow futures -0.23% at 33968

S&P futures -0.28% at 4377

Nasdaq futures -0.35% at 15016

In Europe

FTSE -0.41% at 7534

Dax +0.76% at 16050

• Fed Chair Powell to testify before Congress
• Will he double down on the hawkish stance?
• GBPUSD drops on recession fears after CPI holds at 8.7%
• Oil holds steady ahead of cues from Powell
   

Will Powell double down on his hawkish message?

US stocks are set to kick off the session lower as investors look ahead to the start of Federal Reserve chief Jerome Powell's latest congressional testimony.

Powell will be addressing the House Financial Services Committee just a week after US central bank paused its rate hiking cycle after 10 consecutive interest rate increases.

He is likely to be questioned over the central banks' decision to skip an interest rate hike despite inflation still twice the Fed's target 2% level. He is also likely to be quizzed over projections of two or more interest rate hikes this year.

Powell may use his testimony to hammer home the hawkish message that the market failed to pick up last week. While policymakers pointed to a 5.6% peak rate, up from 5.1%, the market was more focused on the prospect of rate hikes ending soon, lifting stocks to a 14-month high.

While the Fed is signaling another two-interest rate hikes this year, the market is only pricing in around a 75% chance of one more 25 bps rate hike this year, which is expected in July. A hawkish-sounding Powell could force the market to reassess its outlook, pulling stocks lower.

Elsewhere the economic calendar is quiet.
 

Corporate news

FedEx falls after beating quarterly earnings forecasts but issued guidance that disappointed the market. Earnings this current fiscal year are expected between $17.50 - $18.50 a share but Wall Street had been expecting $18.30.

Tesla rises pre-market after CEO Elon Musk met with India's Prime Minister Narendra Modi on Tuesday and is likely to make a significant investment in India.

Other EV makers such as Li Auto, Nio, and X Peng are all rising pre-market between 2.5% and 4% after China unveiled substantial tax breaks to boost sales of EV's over the coming four years.
 

Nasdaq 100 outlook – technical analysis

The Nasdaq 100 has been trending higher, breaking above the multi-month rising trendline before, running into resistance at 15287. The RSI above 70 indicates that the Nasdaq is in overbought territory, so a pullback could be on the cards. Near term, the 20 sma at 14665 could offer support. It would take a move below 14200, the June 8 low, to change the bias to bearish and create a lower low. Buyers will look for a rise above 15287 to extend the bullish run higher towards 15700 the September ’21 high.

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FX markets – USD is steady, GBP falls

The USD is edging higher in cautious trade ahead of Fed Chair Powell’s testimony, which is expected to shape interest rate expectations after the market shrugged off last ‘week’s hawkish comments after the Fed skipped a rate hike.

EUR/USD is holding steady, lacking clear direction I made a quiet eurozone economic calendar, and as investors look ahead to Fed chair Powell's testimony for fresh catalysts.

GBP/USD is falling after data showed that inflation held steady at 8.7% YoY in May, and core inflation increased to 7.1%, its highest level since 1992. The data have cemented expectations of a June rate hike from the Bank of England tomorrow and borrowing costs are now expected to rise to 6% this year a level which is expected to equate to a 2% slide in GDP. The pound is falling for the first time in four days unfair that the Bank of England will hike its way into a recession.

EUR/USD +0.05% at 1.0920

GBP/USD -0.31% at 1.2720
 

Oil flat ahead of Powell.

Oil prices are treading water ahead of Federal Reserve Chair Powell’s testimony and ahead of EIA stockpile data.

The market is looking to Fed Chair Powell for further clues over the path of monetary policy tightening and interest rates. Should Powell double down on his hawkish message, the USD could rise, and recession fears return, hurting the oil demand outlook.

EIA stockpile data is also due later and is expected to show a 400k barrel drawdown in inventories in the week ending June 16.

WTI crude trades +0.14% at $71.15

Brent trades at -0.08% at $75.74
 

Looking ahead

15:00 Fed Chair Powell speaks

15:30 EIA crude oil stockpiles

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