Currently, the major averages are turning in a mixed performance. But Yellen answered Fed critics by arguing that with the Fed’s expanded toolkit in a post-financial crisis world, the Fed is ready and able to fight the next recession and prevent the next financial crisis. If they follow through on a rate increase, it would go a long way to help the Fed’s battered credibility, but it might catch investors off guard, and the market reaction could be violent.
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“I believe the case for an increase in the federal funds rate has strengthened in recent months”, Yellen said in a speech in Jackson, Wyoming. In addition, the Fed’s decision is dependent on data that has yet to come out. Although the bank signaled more rate hikes this year, there has been none so far, as it pointed to risks in the USA economy. “But if next week’s higher profile clutch of surveys for August – in particular the consumer confidence barometer and surveys for manufacturing and construction – follow the pattern shown by the other recent indicators then this might encourage us to upgrade our forecast for Q3 GDP growth from the flat outturn that we now anticipate”.
Ahead of the prepared remarks, trading in fed-fund futures suggested investors were assigning a roughly a 50% probability to the Fed raising interest rates by December and a 24% chance of a September move, according to data from CME Group.
Hunter pointed to a government report Friday that the economy, as measured by the gross domestic product, grew at an anemic 1.1 percent annual rate last quarter as evidence that the Fed likely wants to see stronger growth. The revision matched economist estimates.
The Asia-Pacific benchmark is on track for a 0.3 percent loss for the week, but is up almost 9 percent so far this year.
A separate report from the University of MI unexpectedly showed a slight deterioration in consumer sentiment in the month of August.
European stocks advanced marginally as news of her comments emerged with London and Frankfurt rising 0.3 per cent and Paris gaining 0.8 per cent by the close.
EUROPE’S DAY: Britain’s FTSE 100 was almost flat at 6,814.
Computer hardware and biotechnology stocks also continue to see some strength, while weakness has emerged among networking stocks.
Shares in Asia were mixed.
A near 0.8 percent rise in technology and healthcare stocks led the gains on the S&P.
The Nasdaq Composite was up 28.35 points, or 0.54 percent, at 5,240.56.
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In the bond market, treasuries have pulled back near the unchanged line after moving higher on the heels of Yellen’s remarks. The yield on the 10-year note, which moves in the opposite direction of the price, rose to 1.59 percent from 1.54 earlier Friday.
