“In light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months”, Ms Yellen said.
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Federal Reserve Chairwoman Janet Yellen signaled an increase in a key interest rate will be on the table at the central bank’s next meeting in September, but noted a hike is far from a sure thing. Then investors began to have second thoughts, wondering if an increase was possible as early as next month, and buyers turned to sellers. To ease the impact of the recession, for example, she said the Fed had effectively used bond purchases to reduce long-term borrowing rates and had assured investors that short-term rates would stay low. It was last up 0.4 percent at 13.69.
KEEPING SCORE: The Dow Jones industrial average rose 71 points, or 0.4 percent, to 18,520 at 9:53 a.m.
For the week, the Toronto Stock Exchange’s S&P/TSX composite index fell 0.3 percent.
Giving an upbeat take on the economy, Federal Reserve Chair Janet Yellen says the case for raising interest rates is getting stronger. Yields on government bonds fell.
The yield on the benchmark 10-year note rose to 1.631%, its highest level since the June 23 Brexit referendum and up from 1.576% on Thursday. Investors now see an 18 per cent probability the Fed will raise rates at its September policy meeting and a 53 per cent chance of an increase by December, according to futures data. But since then, global economic pressures, financial market turmoil and a brief slump in the US job market have kept the central bank on the sidelines.
“Anything that’s not going to be straight-out dovish is going to be disappointing”, she said.
ANALYST TAKE: Yellen’s speech is “the big event” of the day and has the potential to “create waves within the calmness that has prevailed throughout this month”, said Margaret Yang, market analyst at CMC Markets Singapore.
The economy grew an annual pace of 1.1% in the quarter, slightly slower than the first estimate of 1.2%. “That is very anemic”.
Since exiting the recession in the summer of 2009, the US economy has been growing sluggishly, making it the slowest recovery since World War II. Traders are now pricing in a 63.7 percent likelihood of a hike in December, up from 51.8 percent Thursday. After trading closed, Icahn said the reports were wrong and, in fact, he has bought more shares.
SOFTWARE SURGE: Design software company Autodesk rose $5.04, or 8 percent, to $68.74 after reporting a small profit, beating expectations of a loss. AT&T and Verizon each fell more than 1 percent. That would be the fourth quarter in a row of drops.
OVERSEAS: Britain’s FTSE 100 rose 0.3 percent, Germany’s DAX gained 0.6 percent, and France’s CAC 40 climbed 0.8 percent.
Hong Kong’s Hang Seng was also higher, up 0.6 percent and set to finish the week flat.
Benchmark U.S. crude oil rose 31 cents to close at $47.64 a barrel.
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The dollar fell to 100.45 yen from 100.58 yen the previous day. Spot gold XAU= inched up 0.2 percent to $1,323.74 an ounce, narrowing this week’s losses to 1.3 percent.
