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The equity market has tabled a risk-averse mindset and is rallying around a ceasefire agreement between Israel and Iran that has led to a further drop in oil prices.
It is a continuation of the rally that took root yesterday following Iran's relatively weak, staged response to the U.S. destroying three of its nuclear facilities over the weekend. Yesterday's rally also had some rate-cut optimism underpinning it after Fed Governor Bowman said she could support a rate cut at the July FOMC meeting if inflation pressures remain contained.
Currently, the S&P 500 futures are up 42 points and are trading 0.7% above fair value, the Nasdaq 100 futures are up 214 points and are trading 1.0% above fair value, and the Dow Jones Industrial Average futures are up 277 points and are trading 0.7% above fair value.
Sentiment is good for now, and that is reflected in a futures trade that is running on headline momentum. Today's session will produce other headlines that could build on that momentum or weaken it.
A short time ago, the Federal Reserve released Fed Chair Powell's prepared statement that will be delivered in front of the House Financial Services Committee at 10:00 a.m. ET in conjunction with his semiannual monetary policy report to Congress.
That text was aligned with what he conveyed following last week's FOMC meeting, noting that "The FOMC’s obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem... [and that]... For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."
That doesn't sound like someone who is eager to plant the seed of a rate cut at the July FOMC meeting, like a few of his colleagues have done recently. In any case, it should be a lively Q&A session with some market-moving potential.
That testimony will begin at roughly the same time as the June Consumer Confidence Index is released. This is soft survey data, yet market participants are looking for continued improvement to shore up their belief that the consumer can be counted on to keep the U.S. economy on a growth trajectory.
Separately, results from the $69 billion 2-yr note auction will be released at 1:00 p.m. ET, and the market will want to see the new supply met with strong dollar demand as Congress continues to debate the "One Big Beautiful Bill." Reports today suggest the Senate could be nearing an agreement on a $40,000 SALT cap with a lower income threshold. The 2-yr note is currently up two basis points to 3.85%, and the 10-yr note is currently up three basis points to 4.35%, with some of the safe-haven premium leaking out on the ceasefire agreement.
The war premium, meanwhile, is quickly leaking out of oil prices. WTI crude futures, which topped $78.00/bbl yesterday, are down 3.7% today to $66.00/bbl. That might not be great for the energy sector, but it is a positive development insofar as inflation pressures are concerned.
