Phil Orlando, a strategist at Federated Investors in NY, said: ‘We continue to believe December was the next logical date for a hike but based on comments from Fed officials lately and the argument from Yellen I guess you can’t take September off the table’.
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The group, some wearing T-shirts bearing the slogan, “We Need a People’s Fed!” posed questions about economic policy and the need for diversity to the Fed officials who took part in the 90-minute discussion.
In overseas markets, Britain’s FTSE 100 rose 0.3 percent, Germany’s DAX gained 0.6 percent and France’s CAC 40 climbed 0.8 percent.
“Although neither Yellen’s comments nor those of other officials have been explicit on the precise timing, this may reflect message discipline ahead of the August employment report to be released next week”, the Goldman economists wrote.
Fed Governor Jerome Powell told Bloomberg Television on Friday the central bank could afford to be patient and that he wanted to see inflation rise before lifting rates.
The Fed raised rates in December, its first hike in almost a decade, but it has held off further increases so far this year due to a global growth slowdown, financial market volatility and generally tepid USA inflation data.
Combined with the 0.8 per cent growth pace in the first quarter, the world’s largest economy grew 1 per cent in the first half of this year.
Commenting on Yellen’s speech, Subadra Rajappa, head of rates strategy at Societe Generale, was cited by the BBC as saying, “We weren’t really expecting her to signal a hike at the September meeting, but she’s just kept the door open for a hike sooner rather than later”.
The comments gave little clarity about where the Fed is heading, but instead sent markets a message: pay less attention to the Fed’s quarterly summary of economic projections, the so-called dot plot, as a guide to policy, and more to the flow of economic data. “Right now, I don’t think the data supports a September hike, and the markets are starting to come to grips with that”. The Fed is moving alone to tighten policy, as other central banks are easing.
Grohowski said the stock market has exceeded his year-end target of 2,150 on the S&P 500, and he is looking at 2,300 or 2,350 for the end of next year. USA stocks, which had been higher, then fell. Utilities decline with rising rate expectations since they are popular for their dividend yields. “I do think there’s some time to go here, so if there’s a change in that, that too would increase market volatility. If it looks like the election starts to look like it’s a close one, that would be potentially disruptive to the market”.
European stocks closed higher, with a late boost from Yellen’s remarks.
The Dow Jones industrial average fell 53 points, or 0.3%, to 18,395. Eastern time. The Standard & Poor’s 500 index added 9 points, or 0.5 percent, to 2,182.
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The Asia-Pacific benchmark is on track for a 0.25 percent loss for the week.
