US markets continued their post-election trend upwards today, as banks resumed a steep upward climb. The Federal Reserve chairwoman, Janet Yellen, emphasized that the Fed planned to raise interest rates. Her comments sent bond yields higher and gave banks a lift.
By Paolo Palazzi-Xirinachs
Thursday, November 17, 2016
The S&P 500 Index neared an all-time high, rising with the dollar as Treasuries fell after Federal Reserve Chair Janet Yellen signaled the central bank is close to raising interest rates. The US stock benchmark rose to within four points of a record, and the Russell 2000 Index of smaller companies capped its longest rally since March 2013, while the Dow Jones Industrial gained despite a disappointing sales forecast from Cisco Systems Inc. The S.&P 500 financial sector index is at its highest level since before the financial crisis as investors hope that the policies of the President-elect will help banks make more money by encouraging economic growth and inflation and cutting regulations.
Ms. Yellen said again that the Federal Reserve was more likely to raise interest rates soon. In prepared remarks for Congress, Ms. Yellen sketched a picture of an improving economy. The Fed is widely expected to raise rates when policy makers meet in mid-December. Ms. Yellen added that if the Fed delayed and later raised rates too quickly, the risk of a recession would increase.
US government bonds slid after Yellen’s comments and a wave of data that pointed to US economic strength. The yield on the 10-year Treasury note rose to 2.28% from 2.22%. Bond yields rise when investors expect higher interest rates.
Banks built on their huge climb last week. Bank of America stock gained 1.9%. Citigroup stock rose 1.8% and shares of PNC Financial Services climbed 2.4%.
The dollar climbed to a five-month high versus the yen as Japanese Prime Minister Shinzo Abe prepared to meet the President-elect in New York. Traders are watching for any comments from Trump, who has accused Japan of currency manipulation. The US currency was buoyed after Fed Chair Yellen said a rate hike could come “relatively soon.” The greenback’s gains helped oil fall below $45 a barrel.
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