Jerome Powell is addressing Congress over the state of the economy. Big banks are flexing big numbers on their earnings reports. Cryptocurrency prices are ironically at the mercy of the Fed. So what will the stock market do today?
- The S&P 500 is down 0.35%
- The Dow Jones Industrial Average is down 0.31%
- The Nasdaq Composite is down 0.38%
So what else will the stock market do today? Here are some of the top stories.
What Will the Stock Market Do Today? Watch Jerome Powell.
Inflation is once again the talk of the town, thanks to the Labor Department’s consumer price index (CPI) update from yesterday. The department is reporting a 5.4% year-over-year jump in CPI — the biggest yearly increase since 2008.
There are all sorts of possible explanations for this inflation jump, whether it be the rampant supply shortages or the massive and quick rebound of travel-related pricing as the country’s economy continues to come out of its coronavirus coma. Today, much of the blame for the inflation jump is being put on the auto market.
Used car and truck rentals saw a 12% increase in June alone. These prices are now up 88% since June of 2020. The rampant price gouging can ultimately still be traced back to those pesky supply shortages. Microchip shortages are strangling new car production, and the used car market has been allowed to flourish as the only reliable option for a new ride.
Reuters is citing the CPI increase as an overstated report, thanks in large part to the state of the pandemic. It reports that White House officials are still calling this inflation transitory and that we could very well be at the tipping point. Economist Robert Frick says of the figures, “June’s CPI numbers looked scary, but once again, we see that it was mainly temporary price increases that pumped up the figures.”
Whether or not these numbers are a big deal can be argued, but it will be interesting to hear what the Federal Reserve thinks. Fed Chairman Jerome Powell is addressing the state of the U.S. economy today in front of Congress, and it can be assured that inflation will be a major talking point.
Bitcoin Drops Further, While Gold Climbs Up
Jerome Powell’s chat with Congress might be interesting even for those invested in cryptocurrency. It seems like federal rate-hike fears are causing slippage. Bitcoin (CCC:BTC-USD) prices are continuing to tumble based on institutional signaling. James Bullard, president of the Federal Reserve Bank of St. Louis, suggests the time is ripe for tapering back on emergency spending.
The U.S. has spent well over $100 billion on bonds in the wake of the pandemic, which in turn saw Bitcoin spending increase tremendously. Ultimately, the bullish market brought Bitcoin to a price of just under $65,000 before regulatory fears tanked it to its current price in the low $30,000 range.
Bullard says the ongoing economic rebound suggests the country should pull back on this emergency spending on bonds. This is is damaging to store-of-value assets like Bitcoin and gold, because a taper would make holding fiat currency a more valuable investment.
This tapering isn’t the only fear being instilled in store-of-value assets; federal rate hikes are looking like a more probable bet by the day thanks to inflation. However, a peculiar divergence is occurring. Bitcoin, as you might expect, is trading downward on the week; it even briefly plunged below $32,000 in the wake of the news.
Gold, on the other hand, is actually increasing on the news. The more traditional store-of-value has gained 0.62% since pre-market trading opened for the day. The divergence in movement yet again highlights the glaring differences between the traditional market and the burgeoning digital currency market.
What Else We’re Watching
- Bank stock earnings week continues today. JP Morgan Chase (NYSE:JPM) and Goldman Sachs (NYSE:GS) are posting impressive profits. Now, the spotlight is now on Wells Fargo (NYSE:WFC), Citigroup (NYSE:C) and Bank of America (NYSE:BAC), which are all reporting today.
- The European Union is trying to expedite its quest toward a greener Europe. A new proposal by the European Commission is aiming to effectively ban the sale of new diesel- and gasoline-powered vehicles by 2035. The proposal also includes the construction of public charging stations along major roads by 2025.
- Coronavirus cases are on the rise in the U.S. yet again. The country is averaging 23,000 new cases per day, more than double the daily transmission average three weeks ago.
- Blockchain security outfit CertiK just brought in an impressive $37 million in its latest funding round. The company, which is taking the crypto world by storm thanks to its thorough auditing service, is seeing the cash injection fueled by crypto players like Binance (CCC:BNB-USD) and Coinbase (NASDAQ:COIN).
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
