U.S. stock futures showed signs of life last night after a dismal day. The Dow +0.6%, S&P 500 +0.7%, Nasdaq +0.9% all looked to bounce this morning at the opening bell, a sure sign that market volatility remains in play. Yesterday’s spike in bond yields caused equities to dump, tumbling the Nasdaq 3%. Facebook, Microsoft, and Google were the biggest losers of the day. 

There is two main drivers to the current market volatility: Inflation and Debt Ceiling crisis. Inflation continues to soar as a result of crippled supply chains. The Debt Ceiling crisis results from hyper-partisanship politics at play and there doesn’t seem to be any good resolution in sight. 

Investors are in preparedness mode for looming higher interest rates. Last week’s Fed meeting indicated a willingness to leverage increased interest rates as a way of tempering inflation. 

“The interest rate induced selloff is a reminder of how impactful monetary stimulus has been with the Fed signaling a swift removal of the emergency stimulus measures is coming soon,” noted Charlie Ripley, senior investment strategist for Allianz Investment Management. “This is an uncomfortable period for market participants as the removal of Fed support will be underway soon and equity markets will have to learn how to stand on their own again. However, we should be reminded that it is unlikely the Fed would move forward with tapering bond purchases if they didn’t think the economy was ready.”

Additionally, oil prices continue to climb to near $90 a barrel. 

Fed Chair Jerome Powell is set to speak at the European Central Bank Forum on Central Banking at 11:45 a.m. ET. It’s unclear what he may or may not say. However, investors continue to watch (and clamor) over the current market volatility. 

Senate Majority Leader Chuck Schumer requested unanimous consent from the Senate to hold a vote to increase the debt limit. But this was swiftly denied by Minority Leader Mitch McConnell. So now Democrats must find another way as the potential for economic doom looms. 

“There is no chance, no chance the Republican conference will go out of our way to help Democrats conserve their time and energy, so they can resume ramming through partisan socialism as fast as possible,” McConnell said.

In our hyper-partisan world, nothing comes easy. Over the past five years, every potential financial crisis has been averted at the last minute. But the more we play with fire, the more likely we will lose one of these battles. If Democrats and Republicans don’t find a solution, the government will become insolvent and not pay bills on October 18th. 

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