US Markets Dipped post Yellen Remarks, Rebounded Monday

Most stocks ended lower on Wall Street, surrendering gains made earlier. This happened post Janet Yellen, the Federal Chairperson’s positive speech concerning the economy of the United States. The Fed Chair spoke at a Wyoming conference, where she underlined the case for raising the interest rates after the improvement of the American economy. Utilities and phone companies, whose business would suffer if there is a rise in the interest rates,  dipped the most. Investors searched other avenues for making income when Yellen said that the possibility of a  rise in US interest rates for the short term has gained ground in recent months.

See-seaw stocks

The much awaited remarks at first led to a stocks sale which quickly went the other way. The stocks went up. The later session saw stocks falling again as expectations of investors for a rise in rates became a possibility later this year. The US dollar and Treasury yields also see-sawed prior to their high finish.

Yellen’s remarks at the economic symposium held once every year in Jackson Hole, Wyoming, were consistent with what authorities of the Federal Reserve have been insisting for a few weeks. According to Ryan Larson of RBC Global Asseet Management, the statement did not come as a surprise. Investors already expected that the Fed chair will give its assent and hike the interest rates soon and at an appropriate time. He also referred to how the stock prices continued to stay near record highs and volatility continues to be low. Labor markets also remain strong. A loose American monetary policy is the force in the financial markets. It supports stocks and bonds, and keeps dollar soft.

Going down

The DJIA or Dow Jones Industrial Average slid 0.3 percent or 53 points to touch 18,395. The S&P 500 index dropped 0.2 percent, or three points to touch 2,169. In contrast, Nasdaq went up by 0.1 percent or six points to 5,218.

There was also a dip in the bond prices. Yields on 10-year Treasury notes went up 1.62 percent. The utilities sector that went up earlier in 2016 on the expectations of rates continuing to remain low, suffered the sharpest dip on August 26. The sector in S&P 500 went down 2.1 percent. The fall negared the gains of 13 percent earlier in the year. WSJ Dollar Index, that measures US currency vis-a-vis 16 other currencies went up 0.8  percent on the same day.  This is due to investoes scaling back expectations of increases in the Fed rate.

Monday, the stock market rebounded after economic data showed that U.S. consumer spending increased for a fourth straight month in July, partially due a strong demand for automobiles. The new data is an additional indicator that could strengthen the argument for the Federal Reserve to raise interest rates this year.

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