Investing.com – Wall Street traded lower on Friday as investors came to grip with the fact that the Federal Reserve was likely to raise rates at the December 13-14 policy meeting.
At 11:07AM ET (16:07GMT), the Dow Jones dropped 40 points, or 0.21%, the S&P 500 lost 6 points, or 0.26% while the tech-heavy Nasdaq Composite traded down 15 points, or 0.28%.
Federal Reserve (Fed) chair Janet Yellen’s testimony to Congress on Thursday suggested that the U.S. central bank would be ready to hike rates at the December 13-14 meeting.
Earlier on Friday, St. Louis Fed president James Bullard indicated that he would likely support a December rate hike.
"Markets are currently putting a high probability on a December move by the FOMC,” he said.
“I’m leaning toward supporting that," Bullard added.
Kansas City Fed chief Esther George, who dissented on the policy vote several times this year based on her preference for a 25 basis point hike, repeated her concern that the U.S. economy could face danger of overheating and reiterated her belief that it was time to begin tightening policy.
“I see moving sooner, rather than later, as taking into account the long and variable lags with which monetary policy operates, and reduces the potential for “go-stop” types of policies that create volatility, rather than subdue it,” she explained at a conference on Friday.
New York Fed president William Dudley did not speak on the outlook for monetary policy in open remarks delivered on Friday.
Dallas Fed president Robert Kaplan, Chicago Fed chief Charles Evans and Fed governor Jerome Powell were also on tap to make appearances throughout the day.
The recent remarks from several Fed officials pointing to December as a likely time to return to “gradual” policy normalization pushed up market expectations for a move at the end of the year.
According to Investing.com's Fed Rate Monitor Tool, odds for a December rate hike were last at 90.6%, compared to just 81.1% the previous week.
Markets also had their eyes on a second rate hike in mid-2017, with chances passing the 50% threshold that the Fed would increase again at the July 26 decision.
The heightened expectations for policy tightening also supported the dollar this week as it hit fresh 14-year highs against a basket of other currencies Friday, marking an intraday high of 101.53. That was its highest level since April 2003.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, inched up 0.01% to 101.01 by 11:10AM ET (16:10GMT).
On a light day for economic data, the Conference Board’s leading indicators rose 0.1% in October as expected.
In big moves on earnings, Abercrombie & Fitch (NYSE:ANF) saw shares sink almost 11% as the teen apparel retailer reported a 15th consecutive quarter of sales declines.
Gap (NYSE:GPS) saw itself in a similar situation with losses of nearly 12% as it registered its seventh successive quarter of declines in sales and admitted that customer traffic was a challenge.
On the upside, Ross Stores (NASDAQ:ROST) bucked the trend as the discount retailer beat on the top and bottom line. Shares soared more than 4%.
Salesforce.com (NYSE:CRM) also saw gains of around 4% on a quarterly profit beat that led the software company to give an upbeat forecast.
Meanwhile, oil prices retreated on Friday on continued skepticism over OPEC’s chances of reaching a meaningful deal over OPEC production.
Despite optimistic comments from various major oil producers’ energy ministers, a report on Friday said that OPEC proposed to Iran that it cap its oil output at 3.92 million barrels per day.
Tehran has constantly insisted that 4 million is the pre-sanction mark it wishes to reach before considering a freeze.
U.S. crude futures lost 0.84% to $45.04 by 11:11AM ET (15:11GMT), while Brent oil traded down 0.73% to $46.16.