While you were sleeping: Yellen signals confidence
Feb. 11 (BusinessDesk) - Wall Street and the US dollar rose after Federal Reserve Chair Janet Yellen signalled
confidence in the US economy, even as she confirmed her expectation for “gradual increases” in the central bank’s key
target interest rate.
“Yellen seems to be maintaining her faith in the outlook of the US economy and still anticipates to raise rates,” Joe
Manimbo, senior market analyst at Western Union Business Solutions in Washington, told Reuters.
Yellen noted that the path for the fed funds rate depended on what the data suggest about the economic outlook, and
flagged both further interest increases as well as flexibility on the timing of them.
“Financial conditions in the United States have recently become less supportive of growth, with declines in broad
measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar,”
Yellen said in testimony to the House Financial Services Committee in Washington.
“These developments, if they prove persistent, could weigh on the outlook for economic activity and the labour market,
although declines in longer-term interest rates and oil prices provide some offset,” according to Yellen.
In 12.30pm trading in New York, the Dow Jones Industrial Average rose 0.3 percent, while the Nasdaq Composite Index
climbed 1.6 percent. In 12.15pm trading, the Standard & Poor’s 500 Index advanced 0.6 percent.
“What Yellen said has been taken positively,” Richard Sichel, chief investment officer of Philadelphia Trust Co in
Philadelphia, told Reuters. “Stocks in general are cheaper now than they were three days ago or three months ago, so
there’s an opportunity to step in.”
Gains in shares of Nike and those of Visa, last up 3.4 percent and 2.7 percent respectively, helped propel the Dow
higher. The biggest losers, in percentage terms, were shares of Walt Disney and those of Caterpillar, down 4.8 percent
and 2.2 percent respectively.
“She is holding to her guns,” Ward McCarthy, chief financial economist at Jefferies in New York, told Bloomberg. “The
financial market turmoil is not going to make them reverse course. It could have an effect on the pace at which they
normalise rates, but they are still committed to normalising rates.”
Europe’s Stoxx 600 Index finished the session with a 1.9 percent increase from the previous close, bolstered by a
recovery in bank stocks. The UK’s FTSE 100 Index added 0.7 percent, while Germany’s DAX Index climbed 1.6 percent, as
did France’s CAC 40 Index.
Shares of Deutsche Bank rebounded amid reports that Germany’s biggest bank might buy back some of its bonds to help
reassure spooked investors.
“It’s a smart act,” John Mack, the former chief executive officer of Morgan Stanley, told Bloomberg. “You know what’s
going on within your bank, if these bonds are traded at distressed levels and you have cash, why wouldn’t you take them
back out.”
(BusinessDesk)