Futures slip ahead of Powell's testimony

[July 10, 2019]  By Medha Singh

(Reuters) - U.S. stock futures fell on Wednesday, as investors eyed Federal Reserve Chairman Jerome Powell's remarks later in the day for clues on the central bank's interest rate policy direction.

Powell begins his two-day semi-annual monetary policy testimony to Congress at 10 a.m. ET and comes when Wall Street's three main indexes have retreated from their record closing highs after a strong June jobs report on Friday tempered expectations of a sharp rate cut this month.

"Equities across the globe are likely to hold their breath as markets ponder whether Powell would confirm or downplay expectations for a potential U.S. rate cut this month," FXTM research analyst Lukman Otunuga wrote in a note.

"Given how financial markets remain extremely sensitive to rate cut speculation, there is a lot at stake today with Powell handed the mammoth task of pleasing investors without overpromising."

Investors will also have another opportunity to gauge policymakers' thinking when minutes from the Fed's latest policy meeting will be released at 2 p.m. ET.

While the central bank has left the door open to an interest rate cut, market participants have fully priced in a reduction at the July 30-31 meeting.

Bets of a more accommodative Fed had been a major driving force that helped markets rebound from the slump in May, which was triggered by escalating trade tensions after President Donald Trump piled more pressure on China and threatened new tariffs on Mexico.
 

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., July 1, 2019. REUTERS/Brendan McDermid

Yields on the benchmark 10-year U.S. Treasury bond <US10YT=RR> edged higher ahead of Powell's testimony and minutes from the meeting. [US/]

The second-quarter earnings season starts in earnest next week, but investors are on edge following warnings of the trade war hurting corporate profits. S&P 500 companies are expected to report a 0.2% dip in profits from a year earlier, according to Refinitiv IBES data.

At 6:50 a.m. ET, Dow e-minis <1YMcv1> were down 69 points, or 0.26%. S&P 500 e-minis <EScv1> were down 8 points, or 0.27% and Nasdaq 100 e-minis <NQcv1> were down 23.75 points, or 0.3%.

The FAANG group of stocks lost some ground in premarket trade. Facebook Inc <FB.O>, Apple Inc <AAPL.O>, Alphabet Inc <GOOGL.O>, Netflix Inc <NFLX.O> and Amazon.com Inc <AMZN.O> were down between 0.3% and 0.6%.

Tesla Inc's <TSLA.O> shares were up 0.8% after Bloomberg reported that the company was preparing to boost output at its electric car factory in Fremont, California, citing an internal email.

(Reporting by Medha Singh in Bengaluru; Editing by Sriraj Kalluvila)

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