The probability of a rate hike at the Federal Open Market Committee’s June 14-15 meeting rose to 34 per cent from 30 per cent before Yellen’s remarks, according to CME Group, where the futures contracts are traded. [.N] USA data released on Thursday showed durable goods orders, pending home sales and initial jobless claims coming in strong, while capital goods orders and the Kansas City Fed manufacturing survey were weak. The minutes showed that Fed officials believed the strengthening economy might warrant a rate hike in June.
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At 11:00 a.m. EDT the Dow Jones industrial average .DJI was up 22.29 points, or 0.13 percent, at 17,850.58, the S&P 500 .SPX was up 4.44 points, or 0.21 percent, at 2,094.54 and the Nasdaq Composite .IXIC was up 17.27 points, or 0.35 percent, at 4,919.04.
Holidays in Britain and the US are likely to curtail volumes on Monday. Jobless claims followed suit, as initial applications for unemployment fell for a second week.
Several regional Fed presidents, ranging from Boston Fed President Eric Rosengren to San Francisco’s John Williams, have in recent weeks urged financial market participants to take more seriously the chances of a rate hike in the next two months, pointing to continued signs of steady if unspectacular growth in the USA economy and the waning of risks posed by global economic and financial conditions. On Friday the Commerce Department said the US economy grew a bit more in the first quarter than it previously estimated.
Federal Reserve Chair Janet Yellen gestures while being interviewed as part of a conversation at a Radcliffe Day event at Harvard University in Cambridge, Mass., Friday, May 27, 2016.
After she spoke markets were putting a 60 per cent chance that the next increase would come in July.
“People think June or July are very much alive now”, said Stephen Massocca, chief investment officer at Wedbush Equity Management LLC in San Francisco. “Markets were getting really soft and some of the weaker areas of the market were sagging and were not doing as well and that’s generally a weak sign”.
Although it signaled a year ago that it would make at least 4 rate hikes in 2016, that expectation was reduced to 2. With a dividend yield of 3.5 percent, the sector is mostly favored when rates are expected to remain lower for longer.
Benchmark 10-year Treasury yields were up over 2 basis points to 1.849 per cent, while two-year yields were up 4 basis points at 0.907 per cent.
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“The gains on the S&P 500 this week have been driven by several factors: oil going over $50 a barrel, gains in Asian and European markets, decreased anxiety about Brexit and big jumps in home sales”, said Randy Frederick, managing director of Trading & Derivatives at Schwab Center for Financial Research. Legg Mason Inc. and Invesco Ltd. rose more than 6 percent.
