Major U.S. benchmarks moved lower on Wednesday after a two-day run of gains. Federal Reserve Chair Janet Yellen commented on a possible December interest rate hike, causing the markets to retreat. Yellen stated that a 25 basis point uptick in interest rates in December would not derail the economy or housing market. New York Fed President William Dudley supported this position, stating that an interest rate hike in December is possible. Regardless of the Federal Reserve’s plans for interest rates, some analysts pointed towards October’s large gains as a cause for the pullback in stocks. The S&P 500 index declined 7.46 points, or 0.4%, to trade at 2,102.33. Eight of its ten main sectors move lower. The biggest decliners were the energy and consumer discretionary sectors, while utilities and tech sectors managed minor gains. The Dow Jones Industrial Average shed 50.57 points, or 0.3%, to trade at 17,867.58. The Nasdaq Composite fell 2.65 points, or less than 0.1%, to close Wednesday’s trading session at 5,142.48. The recent round of statements from the Federal Reserve have changed traders’ expectations for December. In the most recent poll by CME Group’s Fed Watch Tool, it was shown that 60% of traders believe that an interest rate hike will occur in December, compared with Tuesday’s 52% reading. ADP’s preliminary jobs data has shown that 182K jobs have been added last month to the U.S. economy, however this report hasn’t always correctly predicted the official numbers revealed in the nonfarm payrolls report. Regardless, a similar reading in the nonfarm payrolls would further cement the notion of an interest rate hike in December.
European shares also fell on Janet Yellen’s remarks as concerns over the global repercussions of a U.S. interest rate hike weigh down on major benchmarks. The FTSEurofirst 300 added nearly half a percent after erasing ealier gains as higher as 1.1%. The initial round of gains was initiated by comments from the European Central Bank to expand its stimulus programs if necessary. The UK’s FTSE 100 added 29.27 points, or 0.46%, to trade at 6,412.88. The German DAX fell 105.91 points, or 0.97%, 10,845.24. The French CAC 40 added 12.11 points, or 0.25%, to close at 4,948.29.
This week’s upcoming economic data releases continue with the U.S. balance of trade scheduled to release later today, followed by a number of data releases from the Bank of England on Thursday, including inflation and an interest rate decision. U.S. nonfarm payrolls will be released on Friday, followed by U.S. and Canadian unemployment numbers later in the session.