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Fed’s Quarles, Bitcoin Above $40K, Bank CEOs and EIA Data - What's Moving Markets

Published 2021-05-26, 05:53 a/m
© Reuters

By Peter Nurse

Investing.com -- Bitcoin rebounds above $40,000 and Wall Street also pushes higher ahead of a speech by Fed Vice Chair Randal Quarles. Bank CEOs line up for a grilling on Capitol Hill, oil markets wait for the latest official U.S. supply data and retailers offer up more earnings. Here's what's moving markets on Wednesday, May 26th.

1. Fed’s Quarles to speak

Federal Reserve officials have been out in force this week, pushing the mantra that the U.S. central bank is going to look through the rising inflationary pressures, keeping the accommodative policies on hold for the immediate future.

The latest to speak Wednesday is scheduled to be Federal Reserve Vice Chair for Supervision Randal Quarles.

The market still has concerns surrounding inflation and potential tapering, and it will be interesting to see whether Quarles has changed his stance after he outlined a very dovish view in late March. 

“I think it is very credible to expect the committee to be comfortable with inflation somewhat over our 2% target,” he said then, during a speech on financial regulations to the Peterson Institute for International Economics. “Over time we will look to average, and I think that is a very credible commitment from the committee and I am very supportive of it.”

Quarles’s tenure as the Fed’s top banking supervisor expires on Oct. 13, and President Joe Biden is under pressure from some Democrats to replace him following the rollback of some banking rules.

“Our financial system will be safer when you are gone,” Senator Elizabeth Warren said to Quarles during a hearing before the Senate Banking Committee on Tuesday. “I urge President Biden to fill your role with someone who’ll actually keep our financial system safe.”

2. Stocks set to edge higher; Nordstrom, Urban Outfitters in focus

U.S. stocks are set to edge higher Wednesday, rebounding after the recent market rally stalled with the major indices ending the previous session lower.

By 6:25 AM ET, Dow Jones futures were up 120 points, or 0.4%, at just below 34,400, S&P 500 futures were 0.4% higher and Nasdaq 100 futures gained 0.3%.

Wall Street struggled for direction on Tuesday, with early gains dissipating by the close. The Dow Jones Industrial Average closed 80 points, or 0.2%, lower, the S&P 500 dropped 0.2%, while the tech-heavy Nasdaq Composite was largely unchanged.

There has been a relatively calm tone to the market this week, ahead of the three-day weekend, as the earnings season winds down and with the main economic release at the end of the week.

Inflation has become the dominant theme, after the recent sharp jump in consumer prices. Federal Reserve officials have made it clear that they see these rising inflationary pressures as temporary, and thus the central bank’s ultra-easy monetary policies will remain in place for some time to come.

Friday sees the release of personal income and spending data, including the Fed’s preferred inflation measure - core PCE. A sharp rise in this would put the Fed under greater pressure.

The likes of Dick’s Sporting Goods (NYSE:DKS), American Eagle Outfitters (NYSE:AEO), NVIDIA (NASDAQ:NVDA) and Snowflake (NYSE:SNOW) are expected to report earnings Wednesday, while retailers Nordstrom (NYSE:JWN) and Urban Outfitters (NASDAQ:URBN) are also likely to be in the spotlight after they reported their quarterly results after the bell Tuesday.

3. Bitcoin above $40,000; Bitcoin Mining Council formed

Bitcoin, the world’s biggest digital currency, has continued to rebound Wednesday after the weekend’s heavy selloff, climbing back above $40,000 for the first time this week.

The digital currency was last seen 5.6% higher at $40,300, rebounding from a low of $31,192 seen on Sunday.

Helping the recovery was the announcement of the formation of the Bitcoin Mining Council, after MicroStrategy (NASDAQ:MSTR) CEO Michael Saylor brokered a successful meeting between Tesla (NASDAQ:TSLA) CEO Elon Musk and several top North American Bitcoin mining firms.

Musk has been a vocal supporter of bitcoin, and cryptocurrencies in general, but his company recently suspended the use of the digital currency as a method to purchase its vehicles, citing concerns about the impact on the environment from its mining. 

Saylor, whose company MicroStrategy has a large holding of bitcoin, said the miners involved will provide current and planned renewable usage transparency. The council could also fight back against what he described as a hostile anti-cryto narrative portrayed by some institutions and media outlets.

He may well have had China on his mind, as China's northern region of Inner Mongolia escalated a campaign against cryptocurrency mining on Tuesday, days after Beijing vowed to crack down on bitcoin mining and trading.

4. Bank CEOs on Capitol Hill

The chief executives of the country’s largest banks — including JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) - are set to testify before the Senate Banking Committee on Capitol Hill later Wednesday.

This will be the first time these banking powerhouses will have testified before this committee since the aftermath of the 2008 financial crisis. And Democratic gains in the recent election mean the reception could well be frosty.

They are likely to be grilled on a raft of issues, including economic inequality, fair lending, diversity, racial justice, climate change, cryptocurrencies and tax policies.

That said, given the partisan nature of politics these days and the wafer-thin Democrat majority, these hearings are unlikely to result in policy proposals. They are still likely to be compulsive viewing though.

In prepared testimony posted on Tuesday, the CEOs highlighted their banks'  efforts to support struggling clients, as well as their efforts to address climate change and structural racism.

5. Crude edges higher; EIA inventories due

Crude oil prices edged higher Wednesday, helped by strong U.S. crude supply data, although gains are small as traders digest the possible return of Iranian exports.

By 6:25 AM ET, U.S. crude was up 0.1% at $66.10 a barrel, while Brent was up 0.1% at $68.55, continuing Tuesday’s gains as oil prices climb to their highest levels in a week.

Tuesday’s U.S. crude oil supply data from the American Petroleum Institute showed a draw of 439,000 barrels for the week ending May 21, suggesting an improvement in demand after the 620,000-barrel build recorded during the week before.

This puts the focus on the official crude oil supply data from the U.S. Energy Information Administration, due later in the day, where a draw of over 1 million barrels is expected. 

However, it is difficult for investors to take a firm stance, either up or down, until the talks between Iran and world powers over the potential resumption of the 2015 Iran nuclear deal are concluded.

Should the deal be revived, and the U.S. lift sanctions that are currently in place, Iran could add around one to two million barrels per day to the global crude supply.

However, while Iranian government spokesman Ali Rabiei said on Tuesday he was optimistic over reaching an agreement soon, he warned that serious issues remained.


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