US Stocks Pare Decline as Investors Await Janet Yellen Speech
New York (Sept 24) US stocks retreated before a speech by Federal Reserve Chair Janet Yellen, with investors eager for further clarity on the central bank’s stimulus policy.
Equities trimmed earlier losses as energy shares rallied along with crude prices, with Apache Corp. and Diamond Offshore Drilling Inc. rising more than 1.9 percent. Stocks further pared after JPMorgan Chase & Co.’s global head of derivative and quantitative strategies said in note today that technical selling pressure from volatility targeting strategies was largely completed, and in the coming days and weeks flows may be skewed toward buying.
The Standard & Poor’s 500 Index fell 0.4 percent to 1,931.60 at 3:08 p.m. in New York, paring an earlier slide of as much as 1.5 percent. The benchmark is down for the fifth time in six days since the Fed cited turbulence in financial markets as reason to stand pat on interest rates. Trading in S&P 500 companies was roughly in line with the 30-day average for this time of day.
Uncertainty over the Fed’s actions has made equities more volatile in past weeks. The central bank held off raising rates last Thursday and said it would consider spillover risks from global markets. Fed officials have since said a 2015 increase is still warranted. Chair Janet Yellen speaks in Massachusetts after markets close, with investors desperate for guidance on whether she deems the economy robust enough to withstand higher rates this year.
The Chicago Board Options Exchange Volatility Index, the measure of market turbulence known as the VIX, has closed above 20 for 23 straight sessions, the longest stretch since June 2012. The gauge rose 4.2 percent Thursday to 23.06.
Ahead of Yellen’s speech, traders are split on whether the Fed will raise rates this year. They are pricing in about a 40 percent chance of an increase in December, down from 49 percent as recently as Monday, and a 48 percent probability in January. Odds of higher borrowing costs by January were 64 percent on the day before last week’s Fed meeting, according to data compiled by Bloomberg.
Meanwhile, investors continue to evaluate economic data for hints on possible Fed action. A report today showed orders for durable goods fell 2 percent in August, reflecting declines in defense and aircraft. Momentum in orders for business equipment stalled following gains the prior two months as U.S. investment took a breather amid volatility in financial markets and concerns that global growth is slowing.
Separate data showed fewer Americans than forecast filed applications for unemployment benefits last week, a sign that a steady labor market will bolster U.S. growth. Another measure showed purchases of new homes jumped in August to a seven-year high.