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U.S. stocks slip after Yellen remarks while waiting for OPEC

Published 09/28/2016, 12:30 PM
Updated 09/28/2016, 12:30 PM
© Reuters.

© Reuters.

Investing.com – Wall Street traded slightly lower on Wednesday as investors weighed remarks on monetary policy from Federal Reserve chair Janet Yellen and while waiting to see if the Organization of Petroleum Exporting Countries (OPEC) would provide details of a potential agreement to freeze production.

At 12:27ET (16:27GMT), the Dow Jones slipped 16 points, or 0.06%, while the S&P 500 dropped 4 points, or 0.17%, and the tech-heavy Nasdaq Composite traded down 11 points, or 0.20%.

Though Yellen’s speech to the House of Representatives’ Financial Service Committee avoided remarks on monetary policy Wednesday, Yellen admitted in the Q&A period that if job creation continued at its current pace it could lead to overheating of the American economy which in turn would require a more rapid removal of accommodative monetary policy.

While the Fed chair pointed out that there was no “fixed timetable” hiking interest rates, she added that the majority of Fed officials believed that an increase would be likely this year.

Her remarks sent the U.S. dollar index hit an intraday high at 95.62, while gold moved to session lows at $1,324.50.

In other Fed appearances, Minneapolis Fed president Neel Kashkari commented that he believed the economy still had room to run as the healthy clip of job creation was not resulting in inflationary pressure.

St. Louis Fed president James Bullard, speaking on community banking, made no comments on monetary policy.

Chicago Fed chief Charles Evans was scheduled to give the keynote address at the same conference Bullard attended at 1:30PM ET (17:30GMT).

Furthermore, Cleveland Fed president Loretta Mester will speak on the economic outlook and monetary policy at 4:35PM ET (20:35GMT) while Kansas City Fed president Esther George will deliver the opening keynote address at a Forum for Minority Bankers at 7:15PM ET (23:15GMT).

Both Mester and George are seen as hawks by the market and dissented at the last meeting due to their preference to raise rates by 25 basis points.

Markets are currently pricing in the next hike for December with a probability of 56.4%, while odds for the November meeting stood at just 8.3%, according to Investing.com’s Fed Rate Monitor Tool.

Meanwhile, oil prices were experiencing volatile moves throughout the session on Wednesday as market participants awaited word from OPEC on a potential deal for a production freeze at its official meeting in November.

Crude initially popped after U.S. inventory data saw stockpiles in the U.S. fall for the fourth week in a row.

However, gains were quickly pared as investors focused on the 2.027 million barrel build in gasoline inventories, compared to expectations for a gain of 178,000 barrels.

Later crude marked new intraday highs as the Libyan oil minister Mossa Elkony commented that an OPEC agreement could come today, as reported by Bloomberg.

Speculation pointed to a proposal from Algeria that would exempt Nigeria, Libya and Iran from cuts in oil production and place a 10.1 million barrel per day (mbpd) cap for Saudi Arabia and 3.7 mbpd for Iran.

Of note, Tehran has repeatedly stated that would not freeze their production until the country returned to pre-sanction levels of 4 mbpd.

U.S. crude oil futures jumped 2.22% to $45.66 by 12:29AM ET (16:29GMT), while Brent oil rose 2.16% to $46.76.

On the company front stateside, shares in Nike (NYSE:NKE) slumped nearly 3% as future orders disappointed estimates.

On the other hand, BlackBerry Ltd (TO:BB) (O:BBRY) rose more than 3% as the Canadian firm announced its decision to outsource the development and design of its smartphones.

Latest comments

I seem not to understand the connection between the oil market price and FED interest rate hike. How do they affect each other. anybody knows?
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