Powell Senate Hearing, Biden Speech, Rivian, API

© Reuters

By Geoffrey Smith 

-- Federal Reserve Chairman Jerome Powell appears in front of the Senate Banking Committee and will promise to stop inflation becoming 'entrenched'. President Joe Biden is likely to throw his weight behind Democrat-sponsored  legislation to override state-level laws that aim to tighten election procedures. Stocks are set to sustain the momentum from the second half of Monday's session and the U.S. Short-Term Energy Outlook and weekly inventory data from the oil industry provide a double bill of news for oil markets. Here's what you need to know in financial markets on Tuesday, 11th January. 

1. Powell in the Senate 

Jerome Powell heads to Capitol Hill for confirmation by the Senate in his position as Federal Reserve chair for a second term. According to prepared remarks released ahead of his hearing at 10 AM ET (1500 GMT), Powell will say he’s determined not to let inflation become “entrenched”.

Those comments come a day ahead of data that are expected to show annual consumer price inflation hit its highest in some 40 years in December, thanks to ongoing supply chain problems, labor shortages, and a still-high level of disposable savings thanks to fiscal support mechanisms that have sustained demand through the pandemic.

Elsewhere, Atlanta Fed President Raphael Bostic told the Wall Street Journal that he only expects three interest rate hikes this year but that there is a risk of a fourth. Cleveland Fed President Loretta Mester and Kansas City Fed President Esther George are both due to speak at 9 AM ET.

2. Biden to take aim at filibuster

U.S. President Joe Biden is expected to throw his weight behind measures to curtail the Senate’s ability to thwart legislation by ‘filibuster’ in a speech later.

The speech comes a couple of days before the House of Representatives is due to debate new federal legislation aimed at stopping state-level laws that would make it harder for many people to vote. A slew of Republican-controlled states such as Texas have introduced legislation in recent months that they say are aimed at preserving election integrity.

The Democrat-sponsored bill coming to the House would make election day a national holiday, allow for a nationwide period of 15 days of early voting and would also require all states to allow mail-in voting.

Reforming the rules of filibuster could lead to more decisive government, but threatens to upset the historically delicate constitutional balance between state and federal legislatures. The states have traditionally had the last word in setting their own voting procedures. 

3. Stocks set to open higher; JPMorgan (NYSE:JPM) conference to continue

U.S. stocks are expected to open higher later, sustaining the momentum they build in the second half of Monday’s trading session.

The market had reversed sharply halfway through Monday’s trading on perceptions that the latest wave of Covid-19 may yet substantially slow the economy due to mass absenteeism by workers forced to quarantine. As such, fears of a fourth interest rate hike in the course of the year, flagged by analysts at Goldman Sachs and JPMorgan over the weekend, eased slightly.

By 6:20 AM ET, Dow Jones futures were up 78 points, or 0.2%, while S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 0.5%.

Stocks likely to be in focus later include Rivian, after reports that its head of operations Rod Copes left the company at the end of last month.  Market attention will also be on the second day of JPMorgan's annual investment conference, a day after CEO Jamie Dimon told clients he expects 'the best growth in years' for the U.S. economy in 2022.

4. Omicron continues to test China

The Omicron variant of Covid-19 continues to pose challenges for China’s zero-tolerance policy. Regional authorities have locked down a second city, Anyang, in the province of Henan, after finding evidence of community spread of the new variant there.

In addition, a mass-testing campaign for inhabitants of Tianjin, home to the world’s fourth-busiest port, continues. Restrictions at the port of Ningbo last week led to a sharp drop in the availability of trucks to take goods to and from the port.

Hong Kong, meanwhile, closed its airport to arrivals from another 150 destinations.

5. Oil higher ahead of API, STEO

Crude oil prices moved higher as the market continued to look through issues of a short-term dip in demand due to Omicron and focus on the problems facing major producers later in the year, when demand is expected to recover more vigorously.

By 6:30 AM ET, U.S. crude futures were up 1.6% at $79.34 a barrel, while Brent crude was up 1.4% at $81.98 a barrel.

At 4:30 PM ET, the American Petroleum Institute will release its weekly estimate of U.S. crude and distillate stocks, while the Energy Information Administration releases its Short-Term Energy Outlook.

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