5 things to know before the stock market opens on Wednesday

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Here are the most important news, trends and analysis that investors need to start their trading day:

1. Wall Street set to return much of Tuesday’s gains

Traders on the floor of the NYSE, June 16, 2022.

Source: NYSE

U.S. stock futures fell on Wednesday, pointing to an open that would undo most of the previous session’s strong rally ahead of Federal Reserve Chairman Jerome Powell’s first day of 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 Nasdaq gained 2.45% and 2.51% respectively. Tuesday’s rebound came after the S&P 500 had its worst week since March 2020, the month the Covid pandemic was declared.

2. It’s Day 1 of Fed Chief Powell’s economic testimony

Federal Reserve Board Chairman Jerome Powell speaks to reporters after the Federal Reserve raised its target interest rate by three-quarters of a percentage point to stem a disruptive surge in inflation, during a a press conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, United States, June 15, 2022.

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Elizabeth Frantz | Reuters

Powell is expected to present the Fed’s semi-annual monetary policy report to the Senate Banking Committee on Wednesday and to the House Financial Services Committee on Thursday. The Fed chief will deliver prepared remarks and face questions from lawmakers. Skyrocketing inflation and whether the central bank is doing enough to stop it will no doubt be at the center of the debate. In a preview last week, the Fed said the fight against inflation was “unconditional.” The Fed raised rates by 75 basis points at its June meeting and forecast a hike of a similar magnitude at its next meeting in July.

3. Biden should seek a temporary suspension of the federal gas tax

Fuel prices at a Chevron gas station in San Francisco on June 9, 2022.

Bloomberg | Bloomberg | Getty Images

Oil prices fell 4% to around $105 a barrel on Wednesday, hours before President Joe Biden’s expected afternoon announcement calling for a temporary suspension of the federal gasoline tax from 18, 4 cents per gallon. However, a gas tax exemption faces significant opposition in Congress, including among many Democrats. Gasoline prices remain near $5 a gallon nationwide in the heart of the summer driving season. Biden has pulled many levers to try to lower prices, including a record release of barrels from U.S. strategic reserves, production waivers, and pressure on OPEC nations and U.S. energy companies to increase production.

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4. Rising rates are driving demand for riskier variable rate mortgages

Traders turned to bonds on Wednesday, pushing the price of the 10-year Treasury higher and its yield to around 3.2%. Bond prices and yields move in opposite directions. The jump in yields last week to 11-year highs after the Fed’s biggest interest rate hike since 1994 fueled demand for adjustable-rate mortgages. These home loans are considered riskier because they typically offer lower fixed rates for five, seven, or 10 years and then adjust to current future rates, which may be higher. Mortgage applications to buy a home rose 8% last week, although they were 10% lower than they were in the same week last year. Refinance demand fell 3% last week, and was 77% lower than the same week a year ago.

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5. Bitcoin is holding above a key level it broke below on Saturday

As of Wednesday, bitcoin was holding over $20,000, but it was trading lower. On Tuesday, the world’s largest cryptocurrency rebounded from Saturday’s plunge below $18,000, falling below the key $20,000 level for the first time since December 2020. At its low point on Saturday, bitcoin was d ‘about 74% below its all-time high of over $68,000 in November, which was the month of the Nasdaq’s last record high. The overall crypto market capitalization is around $950 billion, according to pricing site Coinmarketcap, from a high of $2.9 trillion in November 2021.

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