Dow poised for fourth down day ahead of Powell testimony

Stock futures are pointing at a lower open on Wednesday ahead of a closely watched congressional testimony by Federal Reserve chairman Jerome Powell.

Futures for the Dow, the S&P 500 the Nasdaq were all down 0.2% early Wednesday. This puts the three major benchmarks on track for their fourth lower open in a row.

The Dow also logged its third consecutive close in the red on Tuesday.

Powell is walking a tightrope in his bi-annual testimony. If the central bank boss indicates that the US economy is healthy, the market could take that to mean that there will be no stimulus in the form of an interest rate cut later this month. Equities would likely fall in this scenario, as the stock market is betting on lower interest rates.

Market expectations slipped to 96% on Wednesday, according to the CME’s FedWatch tool, after sitting at 100% for weeks.

On the other hand, if Powell’s comments suggest that the economy needs a boost, stocks could bounce higher.

Either way, whatever he says will shape how stocks will finish this week.

“Throughout June there was a growing belief that the Fed would cut rates in July, and later this year, but given the solid non-farm payrolls report last Friday, dealers are less convinced the Fed will lurch to a very dovish stance,” said David Madden, market analyst at CMC Markets.

On Tuesday, Philadelphia Fed President Patrick Harker said he didn’t see any need for interest rate changes. He said he would consider a rate cut if the economy weakened substantially, according to The Wall Street Journal.

Powell’s testimony kicks off at 10 am ET. It is followed by the minutes of the Fed’s June meeting, which will be released at 2 pm ET. On Thursday Powell will appear before the Senate Banking Committee.