Handoff To Powell: Prepared Remarks Indicate Dovishness As Testimony Looms

(Wednesday Market Open) Things are moving quickly this morning as investors get a first look at prepared congressional testimony from Fed Chair Jerome Powell. It looks like he’s leaning toward a dovish take on the economy, and that could help give stocks an early boost.

Hours before he started his testimony, Powell’s prepared remarks came out. The crux of his message was that the economy hasn’t improved in recent weeks. He cited concerns about trade issues and slowing global economies, as well as inflation that’s still muted and which he worries could last longer. He also mentioned slow business investment. The market seems to be interpreting this as an indication that the Fed is ready to .

The inflation part is particularly interesting because Powell has often said he sees low inflation as a short-term issue. Now he’s talking about the chance of it remaining “persistent,” which would probably give the Fed a bit more leeway to keep rates lower. moved quickly when the testimony came out, with chances of a second hike in September rising.

With Powell taking center stage, investors might want to consider a bit more caution than usual going into or out of the markets as he testifies. Quick moves aren’t out of the question if Powell says anything particularly interesting. The CBOE Volatility Index () jumped about 4% early Wednesday, but then eased quickly after the release of Powell’s prepared remarks.

Earlier in the day, rose to 2.1% for the first time in a month, apparently as investors tried to build in some caution in case Powell sounded hawkish. Then as VIX retreated after Powell’s remarks got published, so did the 10-year yield, sinking quickly back to 2.05% about 45 minutes before the opening bell. also bounced back and is now above $1,400 an ounce.

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