US stocks falter as yields rise ahead of Fed chairs Jerome Powell speech

After a positive lead from the APAC region on China re-opening optimism, US markets drifted lower as traders braced themselves for an expected hawkish Jerome Powell speech to be delivered midway through todays US session.

The Dow Jones eked out a small gain while the more risk and interest rate sensitive Nasdaq was the underperformer, not helped by a steep drop in AAPL (despite seemingly good news that the iPhone production plant in Zhengzhou is set to loosen COVID restrictions)

The US dollar pared early weakness amid a higher yield environment and risk-off in equities. FX traders also positioning for a hawkish speech from Fed Chair Powell on Wednesday. EURUSD traded lower after finding stiff resistance just under the 1.0400 level. Softer than expected German and Spanish inflation data also giving hope that the ECB may go the 50bp hike route, rather than 75bp at their December meeting.

Bitcoin, decoupling from its usual correlation to tech stocks, found a bid in Tuesdays session. BTCUSD touch on 16.5k before finding resistance.

US Crude Oil prices ended the session after API reported a larger than expected draw on inventory, though flip-flopping headlines from OPEC+ leaks and reports on China COVID restrictions caused a volatile session.

In todays economic releases, the big one will by Fed Chair Jerome Powell’s speech midway through the US session. With recent comments from other Fed governors pushing back on pause or pivot optimism the market is expecting a hawkish tone and positioning accordingly.