Sunday , November 19 2017

Treasuries, stocks fall as dollar gains on Yellen

 

Bloomberg

Treasuries fell, US stocks slipped from records and the dollar rose after Janet Yellen reiterated her view that further tightening is warranted if the economy maintains its growth trajectory.
The yield on the 10-year Treasury note added four basis points after the Federal Reserve chair’s testimony that more interest-rate increases will be appropriate if the economy meets the central bank’s outlook of gradually rising inflation and tightening labor markets. US stocks briefly trimmed losses before turning lower as indications of overbought conditions emerged. The dollar strengthened on the prospect for tighter monetary policy as markets assessed data showing accelerating price gains at Chinese and American factories.
Yellen’s comments came in prepared testimony before the Senate Banking Committee and lifted the odds for a rate hike at the March meeting six points to 36 percent. Futures traders still see less than 50 percent odds for three increases this year. President Donald Trump’s vow to pursue pro-growth policies could push the Fed to pick up the pace, while the latest round of inflation was seen as bolstering the case for tightening before a reading on US consumer price data Wednesday.
“Waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession,” Yellen said.
Here are the main moves in markets on Tuesday:

Stocks
The S&P 500 fell 0.1 percent to 2,325.54 at 11:14 a.m. in New York, after the benchmark index closed up 0.5 percent at a record 2,328.25 on Monday. Rate-sensitive stocks fell, with real estate and utility shares pacing declines. The two have high dividend payouts that lose luster when Treasury yields rise. Banks rose the most. The Stoxx Europe 600 Index was little changed, poised to halt a five-day rally that brought it to the highest level in more than a year.

Currencies
The Bloomberg Dollar Index erased a 0.2 percent drop to advance at 10:06 a.m. in New York. U.S. wholesale prices jumped more than forecast in January did little to move the index earlier. Sterling weakened 0.4 percent after data showed U.K. inflation increased to 1.8 percent from 1.6 percent in December, falling short of estimates in a Bloomberg survey. The euro gained 0.2 percent to $1.0617.

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epa03751580 Traders work on the floor of the New York Stock Exchange at the start of the trading day in New York, New York, USA, 19 June 2013. Inflation remained minimal last month in the United States, leaving the rate-setting Federal Reserve flexibility when it issues monetary policy decisions 19 June in Washington.
Consumer prices rose a seasonally adjusted 0.1 per cent in May, following declines of 0.4 per cent in April and 0.2 per cent in March. Uncertainty about the Fed's plans has left world bond and equities markets yo-yoing in recent weeks. The Fed is scheduled to end its two-day regular meeting with a monetary policy statement at 2 pm (1800 GMT) Wednesday, followed by a closely watched press conference by bank chief Ben Bernanke.  EPA/JUSTIN LANE

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