Janet Yellen's 'hint-hint' speech today pushed Wall Street into positive territory after stating that it was still appropriate for the Fed to proceed "cautiously" in hiking interest rates. The DOW was up 74 points and the Nasdaq was up over one percentage point before backing off highs. Markets are expected to slip back to mixed and perhaps somewhat negative levels over the next few sessions.
Here is the current market situation from CNN Money
North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 1.28% while U.S.'s S&P 500 is up 0.41% and Mexico's IPC is up 0.38%.
$NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages.
NEW YORK (Reuters) - Federal Reserve Chair Janet Yellen said on Tuesday that global risks were not expected to have a deep impact on the United States but that it was still appropriate for the Fed to proceed "cautiously" in hiking interest rates.
(Reuters) - U.S. solar energy company SunEdison Inc , whose aggressive acquisition strategy has saddled it with almost $12 billion of debt, is at "substantial risk" of bankruptcy, one of its two publicly listed units warned on Tuesday.
WASHINGTON (Reuters) - The U.S. Federal Trade Commission on Tuesday sued Volkswagen Group of America, saying the U.S. arm of the German automaker falsely advertised more than a half million diesel vehicles as environmentally friendly when it knew they were emitting excess pollution.
SAN FRANCISCO (Reuters) - The U.S. Justice Department said on Monday it had succeeded in unlocking an iPhone used by one of the San Bernardino shooters and dropped its legal case against Apple, ending a high-stakes legal battle but leaving the broader struggle over encryption unresolved.
(Reuters) - NBC, a unit of Comcast Corp , said it had sold $1 billion in national ads for the Summer Olympics in Rio de Janeiro, as the network prepares to broadcast a rare Games where some of the most high-profile contests will air live in prime time for U.S. audiences.
MANILA (Reuters) - A Chinese junket operator in Manila said on Tuesday that two high-rollers from Beijing and Macau were responsible for bringing $81 million stolen by hackers from Bangladesh's central bank into the Philippines.
MOSCOW (Reuters) - Swiss banks UBS and Credit Suisse are interested in advising the Russian government on several privatizations as long as the deals do not violate sanctions, three banking sources told Reuters.
Remember when the central bank of the United States worried about development in the, well, United States? Those days are gone. Presenting: China. From page 8 of Yellen's speech on "The Outlook, Uncertainty, and Monetary Policy":
There is a consensus that China's economy will slow in the coming years as it transitions away from investment toward consumption and from exports toward domestic sources of growth. There is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it. These uncertainties were heightened by market confusion earlier this year over China's exchange rate policy.
Confusion, that is to say, which was the direct result of the US Dollar soaring to multi-year highs, which forced China, whose currency is peg to said dollar, to aggressively devalue its own currency.
The rest is history.
And it's not just China: it's every country which, as we warned in November 2014, is reliant on the viability of the Petrodollar, and more importantly, keeping the USD low. Here is Yellen explicitly addressing the impact of collapsing oil prices on oil exporters.
A second concern relates to the prospects for commodity prices, particularly oil. For the United States, low oil prices, on net, likely will boost spending and economic activity over the next few years because we are still a major oil importer. But the apparent negative reaction of financial markets to recent declines in oil prices may in part reflect market concern that the price of oil was nearing a financial tipping point for some countries and energy firms. In the case of countries reliant o ...
With the central-bank-inspired short-squeeze-driven equity market surge losing momentum, Janet Yellen's 'hint-hint' speech today to The Economic Club of New York comes at a critical moment. Amid the constant chatter of headline-making Fed members, seemingly flooring (and capping) the S&P's movement with their algo-driving comments, Yellen is caught between a credibility-crushing dovish (the world is collapsing and we need to maintain equity 'wealth' creation) rock and the hawkish (rate normalization continues - just look at how awesome jobs are, stupid) hard place. Good luck...
As Citi notes, the same Yellen that showed up at FOMC two weeks ago will be in NY today.
The market has been leaning to a hawkish Fed the last few days after a series of comments that were perceived as somewhat more hawkish than the FOMC Statement, SEP, and Press Conference. It seems most likely that Fed Chair Yellen will come across as neutral or even slightly dovish relative to the current market lean.
Bottom line question is whether she and the FOMC want to build speculation on three 2016 hikes (just over one hike is priced in now). Why not live a peaceful life?
They may regret that the market took their message as so dovish as to price in barely more than three hikes by end-2018, but pointing to April will get the market to way overshoot their desired path. June is about 50% priced-in and that is probably the way they like it.
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