Fed Chairwoman Gets Investors Attention Again

Fed Chairwoman Gets Investors Attention Again

Fed Chairwoman Gets Investors Attention Again


The focus Thursday was Fed Chairwoman Yellen’s testimony before the US Congress as the market posted another record close.

Wednesday’s testimony confirmed this year’s next rate hike/s and QE policy tightening process that the market expected, but the discussions about the longer-term Neutral rate of Fed funds and caution on the inflation outlook gave investors a reason to be cheerful.

Ms. Yellen’s comments were measured, but markets saw it as Dovish.

The market reaction was not that excessive, so it seems unlikely that there will any attempt to alter the perception with Thursday’s remarks.

Ms. Yellen finished her semi-annual testimony on monetary policy today with an appearance before the Senate Banking Committee.

The highlights of her testimony being her acknowledgement that the federal funds rate would not have to rise all that much further to get to a Neutral policy stance.

It is worth noting out that Ms. Yellen stated Thursday that it is premature to conclude that the underlying inflation trend is falling well short of the Fed’s 2.0% target.

In addition, she said that the Fed will consider the yield curve when setting rates, which created a sense that the FOMC would like to see a steepening of the curve predicated on rising inflation expectations.

As it happened, the yield curve steepen a bit Thursday as the US Treasury market gave back a good portion of Wednesday’s advance.

The 2-yr yield climbed 2 bpts to 1.36% while the 10-yr yield jumped 3 bpts to 2.35%.

The steepening of the yield curve benefited the heavily-weighted financial sector (+0.6%), which typically responds well to widening spreads due to the favorable impact on net interest margins for lenders.

The financial group outperformed for the vast majority of Thursday’s market session, but picked up even more steam in the final stretch to finish at the Top of the sector standings by a nice margin.

Thursday, the US major stock market indexes finished at: DJIA +20.95 at 21553.09, NAS Comp +13.27 at 6274.40, S&P 500 +4.58 at 2447.84 posting another record close.

Volume: Trade on the NYSE came in lite with 867.3-M/shares exchanged

  • NAS Comp +16.6% YTD
  • S&P 500 +9.3% YTD
  • DJIA +9.1% YTD
  • Russell 2000 +5.1% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.38) Bullish (0.33) Bullish (0.35) Bullish (0.46)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.28) Bullish (0.29) Bullish (0.38) Neutral (0.17)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.13) Neutral (0.21) Neutral (0.12) Neutral (0.06)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.37) Neutral (-0.10) Very Bearish (-0.55) Bearish (-0.46)

Stay tuned…

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