Stocks Inch Higher as Yellen Hints at Summer Rate Hike
New York (May 28) Stocks inched higher by mid-afternoon Friday as Federal Reserve Chair Janet Yellen suggested the central bank could implement another rate hike this summer.
The S&P 500 rose 0.3%, and the Nasdaq increased 0.5%. The Dow Jones Industrial Average was up 0.09%.
"It's appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time," Yellen said during a Q&A Friday with Harvard Professor Greg Mankiw. Yellen suggested that a move in the coming months would likely be appropriate.
Yellen's comments coalesce with the past two weeks of Fed rate-hike chatter that has pushed the likelihood of a June rate hike much higher.
The U.S. economy grew at a pace of 0.8% in the first quarter, above a previous estimate showing 0.5% growth. However, the revision was slightly lower than an expected 0.9%. A stronger U.S. dollar, weaker global growth and chaotic financial markets weighed on the U.S. economy, though not as badly as initially feared. Personal consumption was unchanged at 1.9%, its lowest in three quarters.
"No doubt an upward revision of any size helps alleviate the pain of a weaker-than-expected first round Q1 growth report, but a minimal increase does little to reinforce optimism of better times ahead," said Lindsey Piegza, chief economist at Stifel. "Nevertheless, the hawks at the FOMC ... will no doubt highlight any additional upward revision as support to their thesis of fundamental strength in the U.S. economy."
Crude oil prices moved further away from the $50-mark on Friday after briefly topping the level for the first time since in seven months a day earlier. Crude got a pick-up earlier in the week on more signs reduced U.S. production was eating into domestic inventories.
West Texas Intermediate crude oil fell 0.3% to $49.33 a barrel.
Verizon (VZ) rose nearly 1% after reaching a "tentative agreement" with two unions which will end a six-week strike. The strike, the largest in five years, involved around 37,000 workers.
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