US pre-open: Stocks seen lower again as investors eye Powell testimony

US futures pointed to another downbeat session on Wall Street on Thursday as investors awaited new Fed Chair Jerome Powell’s second testimony this week and a slew of economic data.

At 1225 GMT, Dow Jones Industrial Average futures were down 0.4%, while S&P 500 and Nasdaq futures were 0.3% lower.

Investors have been on edge since Tuesday, when a hawkish first congressional testimony by Powell spooked markets by adding weight to expectations of four rate hikes rather than three this year.

Oanda analyst Craig Erlam said: "Powell’s testimony in front of the House Financial Services Committee on Tuesday was very bullish on the economy and led many to believe that a fourth rate hike is on the table this year. While this isn’t a million miles from what markets are pricing in, it did trigger another negative response from markets with US indices falling around two and a half percent since and positioned for further losses today.

"It would appear markets are bracing for more hawkish commentary from Powell today when he appears before the Senate Banking Committee, once again discussing the semi-annual monetary policy report. Given everything that he said on Tuesday, it seems pretty clear that economic forecasts will be revised higher this month and the pace of tightening will likely therefore pick up, which may make today’s less eventful as he reiterates many of the views already expressed. That said, should he wish to back pedal on anything or clarify points that have been misinterpreted, it may attract some attention."

Market participants will also be looking ahead to a raft of economic news. Core PCE, jobless claims and personal income and spending figures are at 1330 GMT, while Markit’s manufacturing PMI is at 1445 GMT and the ISM manufacturing PMI and construction spending are at 1500 GMT.

The core PCE index is the Fed’s preferred measure of inflation and has been gradually ticking up again in the last few months. At 1.5% it is still below the Fed’s 2% target but close enough that any surprise beat will likely trigger a reaction in the markets, particularly following such a hawkish testimony from Powell earlier in the week, Erlam said.

In corporate news, Best Buy, Kohl’s and AMC Entertainment were likely to see active trading following the release of their quarterly earnings before the bell.

Elsewhere, Victoria’s Secret parent L Brands slumped in pre-market trade after its quarterly outlook late on Wednesday left investors disappointed.

On the upside, software company Salesforce.com advanced on the back of better-than-expected quarterly results.