This week, global financial markets’ attention will be fixed on Capitol Hill in the United States. The newly appointed Federal Reserve Chair Kevin Warsh will make his first appearance as Fed Chair at a House Financial Services Committee hearing at 22:00 Beijing time on July 14, before moving to testify before the Senate Banking Committee at 22:00 the next day. This will be the first time Warsh, since taking office, has faced congressional questioning over the semiannual monetary policy report. The market also views it as the most important trading event of the week.
The special feature of 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 has almost no ability to avoid commenting on the latest inflation data. At the same time, major financial institutions—including JPMorgan Chase, Bank of America, Citigroup, and Goldman Sachs—will disclose their second-quarter earnings ahead of the market open on Tuesday.
With inflation data, bank earnings, and testimony from the Fed chair converging in the same window, markets are facing the densest release of policy and fundamentals signals since the start of this year. From three dimensions—policy signals from Warsh’s hearing, the economic resilience revealed in bank earnings, and how inflation data revises rate-cut expectations—this article systematically analyzes how the current run of multiple variables could influence the next leg of performance in U.S. equities.
Warsh’s First Appearance: From “Silence Strategy” to a Congressional Pressure Test
Warsh has been in office as Fed Chair for a little over a month. During this time, he turned “saying less” into a distinctive communication style—on economic outlooks and market-related questions, he has kept largely silent. At the Fed’s June press conference, he refused to make any forecast regarding the July rate meeting, and he also tried to emulate the style of former chairs Paul Volcker and Alan Greenspan: “say as little as possible in public.”
But this week, that restraint will face its first test in Congress. 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 Pingleer also noted that the fundamental reason lawmakers summon Warsh is to demand that he explain how he will bring inflation down to the 2% target—making it hard for him to dodge these outlook risks by hiding behind “not for discussion.”
The market’s first core question is the interest rate path. When Warsh testifies, the Fed’s internal stance has clearly shifted toward “potential rate hikes.” The June dot plot showed that nine Fed officials predict one rate hike during the year, with six of them believing the hike magnitude would exceed one. CME FedWatch shows that as of July 13, the market assigns a 79.5% probability to maintaining rates unchanged at the July 28–29 meeting and a 20.5% probability to a 25 bps rate hike; meanwhile, the probability of a rate hike at the September meeting has risen to 62%.
The starting point for the debate goes back to last year. The Fed cut rates three times then, concerned about weakness in the labor market. But actual inflation stayed in the 3% to 4% range—far above the 2% goal. The current target range for the federal funds rate is 3.50% to 3.75%. Officials in favor of hiking argue that after last year’s cuts, policy may still be more accommodative than initially expected, and the economy no longer needs that support. James Egelhoff, chief U.S. economist at BNP Paribas, expects the Fed to hike rates three times at the latest before December.
The second topic worth watching 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 that AI improving productivity could suppress inflation, he has recently acknowledged that the cost pressure from surging demand for electricity, chips, and materials related to AI buildouts is real, though the timing of the specific implementation remains uncertain. The hundreds of billions of dollars flowing into data centers represent sustained demand, while rates can directly suppress this kind of demand.
Warsh is also under political pressure. Congressional Democrats view Warsh as a close ally of the White House, and with midterm elections approaching in November, Democrats are trying to tie high inflation to the incumbent administration and Warsh together, using it as a bargaining chip to win control of Congress. This makes the hearing’s tone far more combustible than a typical monetary policy discussion.
Bank Earnings: A “Physical Exam” for the Rate Environment
There is a deep intersection between large banks’ earnings and Fed policy—bank profits depend heavily on the rate environment, while banks’ lending and trading data are a direct readout of overall economic health.
JPMorgan Chase will publish 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. Over the past four weeks, the EPS forecast has been raised by 3.7%. The average analyst target price is $353.57, implying about 5.4% upside. JPMorgan has beaten earnings expectations for eight consecutive quarters.
The market’s most watched metric is net interest income (NII). In April, when JPMorgan disclosed its first-quarter results, it cut its full-year 2026 NII guidance to about $103.0 billion. NII is the difference between bank loan and securities income and interest paid on deposits; for a giant bank like JPMorgan, it is a more stable—and more core—profit engine than trading operations. Against an environment where rate expectations remain unclear, the management’s latest NII guidance will be a key variable that influences the stock price.
Bank of America is expected to report EPS of $1.12 and revenue of $30.7 billion, with year-over-year growth of about 25%. Citigroup and Wells Fargo will also report on the same day. Overall, second-quarter earnings for S&P 500 constituents are expected to rise 23.9% year over year, with revenue up 11.7%, which is higher than the 18% growth expectation at the start of April.
On the trading side, large banks’ trading desks are expected to deliver revenue growth of 10% to 15%. Investment banking is showing a mixed picture—equity capital markets appear healthy as IPO activity picks up, but M&A remains subdued due to ongoing geopolitical uncertainty. On credit quality, both household and corporate default rates and debt service metrics remain normal, removing a common risk factor from bank reports.
Bank stocks’ performance this year has already given a clear signal. The KBW Bank Index is up about 12% year to date, outperforming the S&P 500; meanwhile, the KBW Regional Bank Index tracking smaller regional banks has risen even more—about 19%. The trend of capital rotating from AI-driven tech stocks into the banking sector has been underway for some time.
If bank earnings show resilient 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 maintain high rates and even potentially hike. Conversely, if bank results reveal 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 core variable linking Fed policy and market pricing.
Markets expect June headline CPI year over year to fall from May’s 4.2% to 3.8%, and the month-over-month rate could decline 0.1%. That would be the first monthly MoM decrease since 2020. Core CPI is expected to stay around 2.9% y/y. Goldman Sachs expects core CPI to rise 0.17% month over month in June, below market consensus of 0.2%, with the year-over-year pace potentially dropping from 2.9% to 2.8%. BofA Securities expects headline CPI to fall 0.09% month over month, mainly due to a sharp drop in gasoline prices, while core inflation would still rise 0.28% MoM.
On the PPI front, markets expect June headline PPI year over year to ease from May’s 6.5% to 6.2%, but core PPI year over year could accelerate from 4.9% to 5.2%. Upstream inflation pressures are 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 clear: inflation cools → rate-cut expectations strengthen → U.S. Treasury yields fall → growth stock valuations recover. Tech stocks and crypto assets are especially sensitive to rate changes because their valuation models rely heavily on discounting future cash flows.
If June CPI shows inflation falling more than expected, while Warsh releases a relatively moderate signal at the hearing, pressure for the 10-year U.S. Treasury yield and the U.S. dollar could ease. In that case, tech growth stocks and gold may receive support. If inflation data remains firm and Warsh does not rule out further policy tightening, markets may continue to strengthen the “rate-hike trade.”
It is important to note that this week’s market is not trading a single inflation print in isolation, but needs to make continuous judgments by combining “CPI—Warsh hearing—PPI—retail sales.” Whether the data and Warsh’s remarks confirm each other will determine the direction of volatility for U.S. Treasury yields, the U.S. dollar, and tech growth stocks.
Which Equity Sectors in the U.S. Are Most Affected?
Banking stocks are direct beneficiaries—or victims—of the interest-rate environment. Higher rates can help expand net interest margins, but if the yield curve continues to invert or flatten, the spread between banks’ borrowing costs and loan yields may be compressed. The earnings reports from JPMorgan (JPM), Bank of America (BAC), Citigroup (C), and Goldman Sachs (GS) will provide the market with a benchmark reference for the overall health of the banking industry.
Technology stocks are highly sensitive to changes in interest rates. Nasdaq-100 index futures fell more than 1% intraday on July 13, and S&P 500 index futures dropped 0.42%. In valuation models for large tech names such as Nvidia, Microsoft, Meta, and Alphabet, the discount rate for forward cash flows is directly tied to the risk-free rate. If the hearing or inflation data reinforces rate-hike expectations, high-valuation tech stocks face stronger valuation compression pressure.
Crypto assets, as an extreme representative 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 previously dipped below $64,000, rebounded after touching $63,800, and then traded in a range around $64,000. Ethereum was around $1,780, down about 1.4%. In the last 24 hours, more than 67,000 traders worldwide were liquidated, with the total liquidation amount of $236 million. If expectations for rate cuts strengthen, improved dollar liquidity would boost overall risk appetite and could provide support for crypto assets such as Bitcoin and Ethereum. If rate-hike expectations heat up further, risk assets may face ongoing pressure.
Key Indicators to Watch This Week
- July 14 20:30｜U.S. June CPI
- Market impact: Inflation trend assessment
- July 14 22:00｜Warsh House hearing
- Market impact: Fed policy direction
- July 15 pre-market｜Bank earnings such as JPMorgan
- Market impact: U.S. economic health
- July 15 20:30｜U.S. June PPI
- Market impact: Upstream price pressure
- July 15 22:00｜Warsh Senate hearing
- Market impact: Confirmation of policy signals
- July 16 20:30｜U.S. June retail sales
- Market impact: Testing consumer resilience
Conclusion
Warsh’s first congressional hearing is not only a routine policy communication, but also a key window for releasing policy signals amid the triple overlap of inflation data, bank earnings, and geopolitical factors. The market’s core question is simple: in 2026, will the Fed cut rates, keep rates unchanged, or hike rates again?
At present, keeping rates unchanged in July remains the most likely scenario, but the probability of a rate hike in September has already exceeded 60%. Whether inflation data continues to cool, whether bank earnings confirm economic resilience, and whether Warsh’s wording at the hearing leans more hawkish—this combination of three will determine how the market reprices the subsequent rate path.
For investors, the trading logic this week is not a contest driven by a single event, but a process of “data—policy—fundamentals” triple verification. Every data point and every statement is building the basis for judgments ahead of the FOMC meeting on July 28–29. Volatility may be unavoidable, but what is truly worth watching is this: once all signals converge, what new consensus the market will form for the interest-rate path for the remainder of 2026.
FAQ
Q: Why is Warsh’s first congressional hearing so important?
This is Warsh’s first time publicly facing congressional questioning since taking office as Fed Chair. Previously, he had consistently maintained a “say less” communication style and had not made any clear statements about the interest-rate path. The hearing will force him to respond directly regarding inflation, interest rates, and the Fed’s reform plans, and the market will look for key clues about the future direction of policy.
Q: How does the June CPI data affect Fed decisions?
June CPI is the last batch of critical inflation data before the FOMC meeting on July 28–29. If core inflation clearly falls, markets may reduce their bets on rate hikes within the year. If energy prices rise and that increase starts to spread into goods and services prices, expectations for the Fed to tighten policy could intensify. Since the CPI release is only 90 minutes before Warsh’s first hearing, he has almost no way to avoid commenting on the data.
Q: How do bank earnings affect market views on Fed policy?
Banks are cyclical, and their loan demand, credit quality, and net interest margins directly reflect economic health. Strong earnings suggest the economy may not need rate cuts for stimulus, which could reinforce the Fed’s stance of maintaining high rates or even hiking; weak earnings, on the other hand, could reignite market expectations for a more accommodative policy.
Q: Why are crypto assets sensitive to Fed interest-rate decisions?
Crypto assets, as a proxy for risk assets, have prices closely tied to dollar liquidity. Falling rates → improved dollar liquidity → higher risk-asset preference, which could support Bitcoin and Ethereum; rising rates or hotter rate-hike expectations would suppress risk-asset valuations. With Bitcoin currently trading around $64,000, the market is waiting for clear macro-direction signals.
Q: What is the most likely Fed rate path 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 unchanged in July and about a 62% probability of a rate hike in September. Some officials advocate reversing last year’s rate cuts, and BNP Paribas expects the Fed to hike rates three times at the latest before December. The final path depends on whether inflation data continues to cool and whether economic growth slows.
