U.S. Stock Futures Rise as Rate Cut Anticipation Grows Ahead of Powell Testimony

U.S. stock index futures climbed on Tuesday as market optimism regarding a potential interest rate cut in September continued to build, ahead of Federal Reserve Chair Jerome Powell’s testimony before Congress.

In early morning trading, Dow Jones Futures rose, S&P 500 Futures gained, and Nasdaq 100 Futures advanced.

The S&P 500 and Nasdaq Composite reached new record highs on Monday, extending recent gains fueled by investor expectations of a Federal Reserve rate cut in September. However, the Dow Jones Industrial Average lagged slightly, ending the day with a minor decline.

Market participants eagerly anticipate Powell’s two-day testimony before Congress, starting later on Tuesday with the Senate and continuing on Wednesday with the House. The Fed Chair is expected to shed more light on the central bank’s monetary policy outlook, with investors closely watching for any dovish signals, especially in light of recent softer inflation and labor market data.

In addition to Powell’s testimony, several other Fed officials are scheduled to speak this week, including open markets committee members Michelle Bowman and Raphael Bostic.

Investors are also eagerly awaiting the release of key consumer price index (CPI) inflation data for June, due on Thursday, which will provide further insights into the trajectory of inflation. The Fed has consistently emphasized the need for more confidence in easing inflation before considering rate cuts.

Currently, market expectations for a 25 basis point rate cut in September have increased to over 70%, up from 59% last week, according to the CME Fedwatch tool.

The second-quarter earnings season is also set to kick off this week, with several major banks reporting their quarterly results at the end of the week. JPMorgan Chase, Wells Fargo, and Citigroup are among the notable companies scheduled to release their earnings on Friday. Additionally, PepsiCo and Delta Air Lines are also expected to report this week.

Meanwhile, crude oil prices experienced a slight dip on Tuesday, following a less-than-expected impact from Hurricane Beryl on a key U.S. oil-producing region. Market participants are also monitoring the situation in the Middle East, where hopes of a potential ceasefire deal in Gaza could alleviate concerns about global crude supply disruption.

The American Petroleum Institute is expected to release its estimates of weekly crude inventories later in the session, with analysts forecasting a draw given the ongoing summer driving season.

Overall, market sentiment remains positive as investors anticipate a potential shift towards a more dovish monetary policy by the Federal Reserve. The upcoming testimony from Powell, along with key economic data and the start of the earnings season, will play a crucial role in shaping market direction in the coming days.