Verizon Communications and McDonald's led blue-chip decliners
US stocks ended a downbeat week on a flat note on Friday, 26 August 2016 as commentary from the Jackson Hole Symposium boosted U.S. rate hike expectations and weighed on the major averages. The Dow Jones Industrial Average settled behind the S&P 500 and the Nasdaq Composite. Equity indices enjoyed a modest bid at the start of the session as investors pored over a less-hawkish-than-feared interpretation of Fed Chair Yellen's seminal address. Chair Yellen indicated that the case for a rate hike had improved in recent months, but she also acknowledged that monetary policy is not on a preset course.
The Dow Jones Industrial Average and the S&P 500 index finished lower after comments from Fed Vice Chairman Stanley Fischer doubled down on a speech by Federal Reserve Chairwoman Janet Yellen that asserted the case for a rate increase is gathering steam.
The Dow Jones Industrial Average fell 53.01 points, or 0.3%, to finish at 18,395.40, backing off an earlier 124-point gain, but paring a 113-point loss. The S&P 500 index fell 3.43 points, or 0.2%, to close at 2,169.04. The Nasdaq Composite Index rose 6.71 points, or 0.1%, to finish at 5,218.92, after being up about 41 points earlier and down as low as 20 points during the session.
Seven of the 10 index sectors finished in the red. All 10 had been positive earlier in the session. Telecom and utilities, often seen as bond proxies, led the charge lower, while health-care, tech, and financials finished slightly higher. Shares of Verizon Communications and McDonald's led blue-chip decliners.
The dollar saw volatile trading after Federal Reserve Chairwoman Janet Yellen's speech at the Kansas City Fed's annual economic symposium at Jackson Hole, Wyoming. She said the case for an increase in the federal-funds rate had strengthened in recent months, but would remain dependent on what incoming data say about the U.S. economy. Chair Yellen indicated that the case for a rate hike had improved in recent months, but she also acknowledged that monetary policy is not on a preset course.
Janet Yellen sent a strong signal the U.S. central bank is preparing to increase rates as soon as next monthand Fischer's comments furthered that assumption. An increase in U.S. interest rates tends to lift the dollar, which would make oil more expensive for traders who conduct business in other currencies.
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But the dollar then turned decidedly higher after Fed Vice Chairman Stanley Fischer, said Yellen's speech was consistent with the possibility of two rate increases this year. Fischer, however, also said that the August jobs report will influence the central bank's rate decision, echoing Yellen's emphasis on the importance of incoming economic data.
Meanwhile, Cleveland Fed President Loretta Mester on Friday echoed the recent hawkish sentiments of other Fed members, saying it makes sense to start moving interest rates higher.
Bullion prices settled modestly higher on Friday, 26 AUgust 2016 paring earlier gains, as traders eyed moves in the dollar following comments from two top Federal Reserve officials that hinted at a potential U.S. interest-rate hike as early as next month.
December gold tacked on $1.30, or 0.1%, to settle at $1,325.90 an ounce Friday. It had eased back from earlier highs above $1,344 that were hit as Yellen spoke and the U.S. ICE Dollar Index dropped. Gold futures were down about 1.5% for the week, the biggest weekly decline since the week ended July 15. December silver rose 13 cents, or 0.7%, to $18.745 an ounce, leaving the white metal with a 3.6% weekly drop.
Crude oil futures managed to hold on to a modest gain on Friday, 26 AUgust 2016 but finished well off the session's highs as the U.S. dollar moved sharply higher. Comments from Federal Reserve Chairwoman Janet Yellen, at a closely watched symposium on Friday in Jackson Hole, Wyo., pointed to the potential for an increase in interest rates as early as next month, but she also said action by the central bank will still depend on coming economic data.
October West Texas Intermediate crude rose 31 cents, or 0.7%, to settle at $47.64 a barrel on the New York Mercantile Exchange. It was trading at $47.39 before Yellen's speech and touched highs above $48 as she spoke. For the week, prices lost about 3% following gains over the last three weeks.
Ahead of the speech, a second estimate of second-quarter gross domestic product did little to boost stocks, underscoring that the U.S. economy is still muddling along, growing at a lackluster 1.1% paceslower than preliminary reading of 1.2% as corporate profits fell.
Among other economic reports, the trade gap narrowed to a seasonally adjusted $59.3 billion in July from $64.5 billion in June.
The University of Michigan's final August reading of consumer sentiment slipped to 89.8 from 90.0 in July. The index is 2.3% lower than a year ago. Market had forecast a reading of 91.0.
Treasuries ended on a lower note as yields rose through the curve. The yield on the benchmark 10-yr note finished higher by four basis points (1.62%) while the yield on the 2-yr note finished at 0.84% (+5 bps).
Friday's participation was above the recent average as more than 797 million shares changed hands on the NYSE floor.
Monday's economic data will include July Personal Income (consensus 0.4%), Personal Spending (consensus 0.3%), and Core PCE Prices (consensus 0.1%), which will each be released at 8:30 ET.
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