Markets are entering the session in a controlled holding pattern.

Futures are slightly lower but orderly.

Gold is easing after yesterday’s surge, still holding above the new regime level.

The dollar is firmer as Monday’s unwind partially reverses.

Long rates are edging higher, not because growth is breaking, but because inflation is the gate today controls.

And banks are back in focus as earnings season begins under a new layer of policy risk.

That mix matters.

Yesterday was about credibility as a tradable variable.

Today is about whether inflation gives the market permission to keep treating that credibility stress as containable.

If CPI prints firm, yields rise for the simplest reason.

Cuts get pushed.

Financial conditions tighten at the margin.

And policy noise becomes harder to ignore because the market no longer has rate relief to buffer it.

If CPI cooperates, the bull case remains intact.

Earnings can do the work.

AI leadership can hold.

And the Powell story can stay priced as insurance rather than a regime shift.

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The most important overnight development is not another market move.

It is the political reaction function forming around the investigation.

Trump allies and senior officials are now openly worried about blowback.

Senate Republicans are signaling they may block Fed nominees until the legal matter is resolved.

Treasury is reportedly warning that the probe could complicate confirmations and unsettle markets.

That is an institutional feedback loop.

It turns what looked like a one sided pressure campaign into a contested process that can drag.

At the same time, global central bankers issued an extraordinary solidarity statement backing Powell and emphasizing central bank independence.

That matters less as symbolism than as coordination.

When foreign central banks feel compelled to speak, markets infer that the cost of escalation has risen.

The market response reflects that recalibration.

Gold is taking profits rather than accelerating.

The dollar is stabilizing.

Equities are not repricing yesterday’s risk further.

This is not resolution.

It is containment, for now.

The Powell story is not isolated.

It is being folded into a broader affordability posture that is widening the surface area for policy intervention.

The credit card rate cap remains the clearest example because it hits bank economics directly.

But the administration is also floating restrictions on large investors buying single family homes, mortgage market support through government backed buyers, and explicit pressure on data center driven electricity costs.

This is a pattern.

The White House is signaling that prices are now a policy object, not just an economic outcome.

Markets do not need these ideas to pass quickly to react.

They only need to believe discretionary intervention is becoming more acceptable.

That is why banks remain the pressure valve.

They sit closest to policy authority.

They monetize spreads and fees that can be capped, taxed, or redirected.

So even if earnings are strong, the multiple becomes a political question.

The CPI report arrives into a market that already assumes the Fed stays on hold this month.

The real question is whether June stays viable.

Consensus expects headline inflation steady around 2.7% year over year with a firmer monthly pace.

Core is expected to tick higher, with upside risk as shutdown distortions unwind and goods and travel categories normalize.

A clean print keeps the market narrative intact.

Strong earnings, gradual disinflation, and two cuts later in the year.

A hot core print changes the framing.

It turns today from a routine data check into a constraint event that forces rates to do more of the tightening work.

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Today’s tape has two simultaneous tests.

Bank earnings begin with JPMorgan, and expectations are elevated.

Investors want confirmation that trading and investment banking momentum held into year end.

They want reassurance on consumer credit.

They want a stable outlook for net interest income.

But this season has an added wrinkle.

Even strong numbers may not be enough if guidance is cautious or if policy risk becomes part of every forward view.

Jamie Dimon will be asked about the credit card cap.

He will be asked about the Powell probe.

And markets will listen for how directly management teams start pricing politics into operating assumptions.

This is where the tape can change without a selloff.

Equities can keep making highs while leadership rotates, multiples compress in policy exposed sectors, and hedges stay structurally bid.

Japan reopened from holiday with a statement move.

The Nikkei surged to a record close.

The yen weakened sharply.

Government bonds sold off and yields jumped as markets priced a potential snap election and a stronger stimulus bias.

This is not a normal risk rally.

It is a macro trade.

Stronger fiscal posture, looser monetary constraints, weaker currency, higher yields, and higher equities.

It is a reminder that in 2026, politics is not a tail input.

It is directly shaping rates and FX across major markets.

Trump’s threat to impose a 25% tariff on countries doing business with Iran raises the temperature, especially with protests escalating and communications blackouts deepening.

There is also a new information layer.

Iran is reportedly hunting Starlink terminals as protesters use the network to get footage out.

That turns the situation into an infrastructure story, not just a street story.

Escalation risk rises when information becomes the battlefield.

Yet crude remains restrained relative to the political noise.

That keeps the market’s message consistent.

This is being treated as persistence risk, not immediate supply shock.

Metals have done more of the hedging work than oil because metals price long cycle stress and governance uncertainty more cleanly.

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The Market Is Pricing Two Regimes At Once

One regime is still the familiar one.

Growth is steady.

Earnings are improving.

AI capex is powering winners.

Volatility is contained.

The second regime is emerging quietly in parallel.

Independence is contestable.

Prices are a political objective.

Institutional discretion is expanding across finance, housing, and energy.

That does not force a crash.

It forces a different architecture of risk.

That is why you can see records in equities and bids in hedges at the same time.

It is not contradiction.

It is the market building two portfolios simultaneously.

One for growth.

One for rules.

Data: ADP Weekly Employment Change, CPI, New Home Sales,
Fed Speakers: Musalem, Barkin
Earnings: JPMorgan (JPM), Bank of New York Mellon (BK), Delta (DAL)
Overnight: Nikkei +3.10%, Shanghai -0.64%, FTSE 100 -0.05%, DAX -0.12%

Yesterday, the market priced credibility.

Today, it prices constraints.

If CPI is benign, earnings can carry the tape and yesterday’s stress stays quarantined.

If CPI is firm, the market loses flexibility and politics gets louder because the rate cushion disappears.

Order still exists.

But the market is no longer trading only outcomes.

It is trading who gets to set the rules that produce them.