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Mixed Markets Ahead of Powell Testimony Tuesday

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Mixed markets greeted us this morning to start a new week, and mixed markets is what we’ve got and the close of the regular session. The Dow grew 72 points on the day, +0.21%, although the blue-chip index had gained more than 100 points this morning, putting the Dow back over 35K for the first time in weeks. The Nasdaq dipped back below 15K, -0.52%, today, while the S&P 500 dropped a slight -0.28%. The small-cap Russell 2000 agin won the day, +1.46%.

The S&P came into September with a six-month winning streak, but with just three more trading days left in the month, this may be in jeopardy. The Dow rode higher crude oil prices higher on the day, but tech majors like Microsoft (MSFT - Free Report) and Apple (AAPL - Free Report) were down today, -1.7% and -1.0%, respectively. Tesla (TSLA - Free Report) gained +2.2% this Monday, however. The 10-year yield rate on a Treasury bond had been slightly north of +1.5% and hit the closing bell at +1.49%.

Not one but two Federal Reserve presidents — Eric Rosengren in Boston and Robert Kaplan in Dallas — have announced today they will be stepping down from their posts. Rosengren cited health issues and announced his last day will be Thursday, September 30th. Kaplan, who came under scrutiny for financial disclosures while a voting member of U.S. monetary policy, said he intended to leave the FOMC at the end of next week. Both men had been accused of making improper trades while holding their respective posts.

Major U.S. harbors — in Los Angeles and elsewhere — are demonstrating real supply constraint issues in this past week, with a record number of cargo ships stuck outside ports off the coast of California. These are expected to further aggravate access to goods with already low inventories, not to mention price hikes being passed down the delivery chain. A shortage in dock labor and concerns about the Covid-19 Delta variant have hampered ports on and off for more than a month.

Advance trade in goods, a new Case-Shiller home price index and Consumer Confidence all await markets tomorrow. Fed Chair Jay Powell also testifies about monetary policy relating to Covid-19. Further, as Powell takes the stand before the House Banking Committee Tuesday, he reportedly will tell representatives that supply constraints have lasted longer than he initially thought, and they do run upside risk of higher sustained inflation.

In the case of such an event, Powell has said in a written statement released before tomorrow’s appearance that the Fed “would respond,” likely with the tapering of asset purchases from their current $120 billion per month, perhaps sooner than analysts had been expecting. Recall the FOMC met just last week, and discussed a future timeline for tapering and then raising interest rates, but this wasn’t expected to be announced until the Fed’s next meeting in November.

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