This week, global financial markets will focus on Capitol Hill in the United States. Newly appointed Federal Reserve Chair Kevin Warsh will make his first appearance as Fed chair before the House Financial Services Committee at 22:00 Beijing time on July 14, then testify before the Senate Banking Committee the next day at 22:00 Beijing time. This will be the first time Warsh has faced congressional questioning on the semiannual monetary policy report since taking office, and markets view it as the most important trading event of the week.
The special thing about this hearing is the triple overlap of timing. The U.S. Department of Labor will release the June Consumer Price Index (CPI) at 20:30 on Tuesday, and the June Producer Price Index (PPI) at 20:30 on Wednesday. The CPI release is only 90 minutes before Warsh’s first hearing, meaning he can hardly avoid commenting on the latest inflation data. Meanwhile, major financial institutions such as JPMorgan Chase, Bank of America, Citigroup, and Goldman Sachs will concentrate the disclosure of their second-quarter earnings before the market opens on Tuesday.
Inflation data, bank earnings, and the Fed chair’s testimony to Congress converge within the same window, leaving markets facing the densest release of policy and fundamental signals since the start of this year. From three dimensions—policy signals from Warsh’s hearing, the economic resilience revealed by bank earnings, and revisions to rate-cut expectations implied by inflation data—analyze how this round of multiple variables will shape the next move for U.S. equities.
Warsh’s debut: from “silence strategy” to a congressional pressure test
It has been a month since Warsh became Fed chair. During this period, he turned “saying less” into a distinctive communication style—on the economic outlook and market-related issues, he has mostly remained silent. At the Fed press conference in June, he declined to forecast the July rate meeting and tried to emulate the “say as little as possible in public” approach associated with former chairs Paul Volcker and Alan Greenspan.
But this week, that restraint will be tested by Congress for the first time. Mark Spindler, chief investment officer at Potomac River Capital, said, “Warsh must respond to the ‘bosses’ on Capitol Hill.” UBS’s chief U.S. economist Jonathan Plass also noted that lawmakers’ fundamental reason for summoning Warsh is to demand that he explain how to bring inflation down to the 2% target—making it difficult for him to dodge these outlook risks by claiming they are “not up for discussion.”
The first core issue the market is watching is the interest-rate path. When Warsh testifies, the Fed’s internal stance has already clearly tilted toward “possibly raising rates.” The June dot plot shows nine Fed officials predicting one rate hike during the year, with six of them believing the hike would be more than once. CME FedWatch shows that as of July 13, the market assigns a 79.5% probability to no change in rates at the July 28–29 meeting and a 20.5% probability to a 25 bps hike; meanwhile, the probability of a hike at the September meeting has risen to 62%.
The starting point for the debate dates back to last year. At that time, the Fed cut rates three times out of concern that the labor market would weaken, but actual inflation stayed in the 3% to 4% range—well above the 2% target. The current target range for the federal funds rate is 3.50% to 3.75%. Officials supporting a hike argue that after last year’s cuts, policy may still be more accommodative than initially expected, and that the economy no longer needs that support. James Eggl?hoff, chief U.S. economist at BNP Paribas, expects the Fed to hike rates three times by no later than December.
The second issue worth focusing on is AI’s impact on inflation. In its semiannual monetary policy report released last week, the Fed explicitly listed artificial intelligence as one of the short-term drivers of inflation. Although Warsh previously believed AI boosts productivity and can suppress inflation, more recently he acknowledged that the cost pressure from a surge in electricity, chips, and materials demand tied to AI buildouts—and the timing of those effects—remains uncertain. Hundreds of billions of dollars flowing into data centers represent sustained demand, while interest rates can directly suppress this type of demand.
Warsh also faces political pressure. Congressional Democrats view Warsh as a close ally of the White House, and as the midterm elections approach in November, Democrats are trying to link high inflation with the sitting administration and Warsh as a bargaining chip to win control of Congress. This makes the hearing’s atmosphere far more combustible than a routine monetary policy discussion.
Bank earnings: a “checkup report” for the interest-rate environment
There is a deep logic connecting large bank earnings with Fed policy—bank profits depend heavily on the interest-rate environment, while banks’ lending and trading data provide a direct read on economic health.
JPMorgan Chase will release its second-quarter earnings before the market opens on Tuesday. Wall Street expects adjusted earnings per share of $5.62 and revenue of $49.5 billion, with the EPS forecast for the past four weeks having been raised by 3.7%. Analysts’ average price target is $353.57, implying roughly 5.4% upside. JPMorgan has beaten earnings expectations for eight straight quarters.
The most watched metric is net interest income (NII). When JPMorgan disclosed its first-quarter results in April, it lowered its full-year 2026 NII guidance to about $103 billion. NII is the difference between loan and securities earnings and interest paid on deposits; for a mega-bank like JPMorgan, it is a more stable and core profit engine than trading. In a backdrop where rate expectations remain unclear, the management team’s latest NII guidance will be a key variable affecting the stock price.
Bank of America expects earnings per share of $1.12 and revenue of $30.7 billion, up about 25% year over year. Citigroup and Wells Fargo will also report on the same day. Overall, S&P 500 components are expected to grow second-quarter earnings by 23.9% year over year and revenue by 11.7%, which is an upward revision from the 18% earnings growth forecast earlier in April.
On the trading side, large banks’ trading desks are expected to deliver 10% to 15% revenue growth. Investment banking shows a mixed picture—equity capital markets look healthy as IPO activity picks up, but M&A is still lackluster, dragged down by geopolitical uncertainty. On credit quality, home and corporate default rates and debt service metrics remain normal, removing a common risk factor from bank earnings.
Bank stocks’ performance this year already tells a story. The KBW Bank Index is up about 12% year to date, outperforming the S&P 500; the KBW Regional Bank Index, which tracks smaller regional banks, has risen even more, by about 19%. The trend of capital rotating from AI-driven tech stocks into the banking sector has been ongoing for some time.
If bank earnings show steady loan demand and good credit quality, it will reinforce the view that the economy does not need rate cuts for stimulus—providing fundamental support for the Fed to keep high rates or even hike. Conversely, if bank performance reveals signs of deterioration in consumer credit, it could reignite market expectations for rate cuts.
Inflation data: the “switch” for rate-cut expectations
Inflation data is the key variable linking Fed policy with market pricing.
Market expectations are for June headline CPI to fall year over year from May’s 4.2% to 3.8%, with a possible 0.1% month-over-month decline. That would be the first monthly month-over-month drop since 2020. Core CPI is expected to stay around 2.9% year over year. Goldman Sachs expects core CPI to rise 0.17% month over month in June, below the 0.2% consensus, and the year-over-year pace could ease from 2.9% to 2.8%. Bank of America Securities forecasts a 0.09% month-over-month decline in headline CPI, mainly due to a sharp drop in gasoline prices, but core inflation month over month is still expected to rise 0.28%.
On the PPI front, market expects June headline PPI’s year-over-year increase to ease from May’s 6.5% to 6.2%, while core PPI’s year-over-year increase could accelerate from 4.9% to 5.2%. Upstream inflation pressure is still building, and the energy shock triggered by the Iran war continues to affect the economy.
The transmission logic between falling inflation and rate-cut expectations is relatively straightforward: inflation cools → rate-cut expectations strengthen → U.S. Treasury yields fall → growth stock valuations recover. Technology stocks and crypto assets are especially sensitive to interest-rate changes because their valuation models rely heavily on discounting future cash flows.
If June CPI shows inflation falling more than expected and Warsh delivers relatively moderate signals at the hearing, 10-year U.S. Treasury yields and the dollar could face downward pressure, and technology growth stocks as well as gold may receive support. If inflation data remains firm and Warsh does not rule out further policy tightening, the market could continue to intensify the “rate-hike trade.”
It is particularly worth noting that this week’s market is not trading a single inflation print in isolation; it needs continuous judgment combining “CPI—Warsh hearing—PPI—retail sales.” Whether the data and Warsh’s statements confirm each other will determine the direction of volatility in U.S. Treasury yields, the dollar, and technology growth stocks.
Which U.S. equity sectors are most affected?
Banking stocks are direct beneficiaries—or victims—of the interest-rate environment. A high-rate environment supports net interest margin expansion, but if the yield curve keeps inverting or flattening, the spread between banks’ borrowing costs and loan yields could be compressed. The earnings from JPMorgan (JPM), Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS) will provide the market with a benchmark for the overall health of the banking industry.
Technology stocks are highly sensitive to interest-rate changes in their valuations. Nasdaq 100 Index futures fell more than 1% during July 13 trading, while S&P 500 Index futures were down 0.42%. In valuation models of large tech names such as Nvidia, Microsoft, Meta, and Alphabet, the discount rate applied to forward cash flows is directly tied to the risk-free rate. If the hearing or inflation data reinforces rate-hike expectations, high-multiple tech stocks could face greater valuation compression pressure.
Crypto assets, as the extreme representatives of risk assets, are also sensitive to changes in dollar liquidity. As of July 13, Bitcoin was around $62,700, down about 2% over the past 24 hours. Bitcoin had earlier dipped below $64,000, rebounded after touching $63,800, and then traded in a range near $64,000. Ethereum was around $1,780, down about 1.4%. In the last 24 hours, more than 67,000 people worldwide were liquidated, with total liquidation amounts of $236 million. If expectations for rate cuts strengthen and dollar liquidity improves, it will lift overall risk appetite and may support crypto assets such as Bitcoin and Ethereum; if rate-hike expectations continue to heat up, risk assets could face ongoing pressure.
Key indicators to watch this week
- Jul 14 20:30｜U.S. June CPI
- Market impact: judging the inflation trend
- Jul 14 22:00｜Warsh House hearing
- Market impact: direction of Federal Reserve policy
- Jul 15 pre-market｜JPMorgan and other banks’ earnings
- Market impact: U.S. economic health
- Jul 15 20:30｜U.S. June PPI
- Market impact: upstream price pressures
- Jul 15 22:00｜Warsh Senate hearing
- Market impact: confirmation of policy signals
- Jul 16 20:30｜U.S. June retail sales
- Market impact: a test of resilience on the consumer side
Conclusion
Warsh’s first congressional hearing is not only a routine policy communication, but also a crucial window for releasing policy signals under the overlay of three variables: inflation data, bank earnings, and geopolitical factors. The market’s question boils down to one thing: for the Federal Reserve in 2026, will the path be rate cuts, keeping rates unchanged, or a return to rate hikes?
At present, keeping rates unchanged in July remains the most likely scenario, but the probability of a rate hike in September is already above 60%. Whether inflation data keeps falling, whether bank earnings confirm economic resilience, and whether Warsh’s wording at the hearings is more hawkish—this combination will determine how the market reprices the subsequent interest-rate path.
For investors, the trading logic this week is not a bet on a single event, but a process of triple validation: “data—policy—fundamentals.” Every data release and every statement is building the basis for judgment ahead of the FOMC meeting on July 28–29. Volatility may be unavoidable, but what truly matters is this: once all signals converge, what new consensus will the market form about the interest-rate path for the rest of 2026?
FAQ
Q: Why is Warsh’s first congressional hearing so important?
This is the first time Warsh has publicly faced congressional questioning since taking office as Fed chair. Previously, he maintained a “say less” communication style and did not make an explicit statement on the interest-rate path. The hearing will force him to respond directly on inflation, interest rates, and the Fed’s reform plans, and the market will look for key clues about the direction of future policy.
Q: How will the June CPI data affect Fed decision-making?
June CPI is the last batch of key inflation data before the FOMC meeting on July 28–29. If core inflation clearly falls, the market may reduce its bets on rate hikes within the year; if energy prices rise and begin to spread into goods and services prices, expectations for the Fed to tighten policy further will intensify. CPI is released only 90 minutes before Warsh’s first hearing, leaving Warsh with little room to avoid commenting on the data.
Q: How do bank earnings influence the market’s view of Fed policy?
Banks are a cyclical industry—loan demand, credit quality, and net interest margins directly reflect economic health. Strong earnings imply the economy does not need rate-cut stimulus, which may reinforce the Fed’s stance of keeping high rates or even hiking; weak earnings could reignite market expectations for easier policy.
Q: Why are crypto assets sensitive to the Fed’s interest-rate decisions?
Crypto assets, as a representative of risk assets, have prices that are highly correlated with dollar liquidity. Rate cuts → improved dollar liquidity → higher risk-asset preference, which could provide support for Bitcoin and Ethereum; a rise in rates or hotter rate-hike expectations would compress risk-asset valuations. Bitcoin is currently trading around the $64,000 area, and the market is waiting for clear macro direction signals.
Q: What is the most likely interest-rate path for the Fed in 2026?
The current target range for the federal funds rate is 3.50% to 3.75%. CME FedWatch shows a roughly 79.5% probability of holding rates steady in July and about a 62% probability of a rate hike in September. Some officials advocate reversing last year’s cuts, and BNP Paribas expects the Fed to hike at least three times by December. The final path depends on whether inflation data keeps falling and whether the economy shows signs of cooling.
