Yellen Testifies With Jobs, Earnings In Focus
Yesterday, Chair of the Board of Governors of the Federal Reserve Janet Yellen presented her semi-annual testimony on monetary policy to the House Financial Services Committee, striking a fairly upbeat tone despite acknowledging the uncertainty posed by China’s slowing economy and the Greek crisis.
Thursday, July 16, 2015 - 00:00
Ms Yellen believes conditions are ‘favorable for further improvement in the US labor market and the economy more broadly’ and also said that the effect of dollar appreciation on net exports should diminish with time. Ms Yellen said that if the economy improves as the FOMC expects it would likely make it ‘appropriate at some point this year’ to raise interest rates.
Data released on Thursday morning suggests that further progress is being made toward the Fed’s goal of maximum employment, with significant falls in jobless claims last week, though the data may be obfuscated by the annual factory shutdowns that occur at this time of year in the auto industry for retooling. Initial claims declined by a sharp 15,000 last week to 281,000, slightly better than expectations that had pointed to 282,000. The previous week’s spike in new claims means that the four-week moving average looks far less encouraging though, climbing to 282,500, which is higher than things were looking a month ago.
Continuing claims, data for which always trails initial claims by a week, are very promising, plunging 112,000 to 2.215 million for a new post-recession low.
Earnings are once again in focus today, with Dow-component Intel ($INTC) beatings expectations with the quarterly earnings that it reported after the market close yesterday evening, while Citigroup ($C) released results earlier this morning, beating estimates for both earnings and revenue, helping shares in the company to rise2.6% in early trading. Goldman Sachs ($GS) lost 1% though, after announcing weaker second-quarter earnings compared to the previous year, in light of higher legal costs. Google ($GOOG) reports after the closing bell this evening.
In the forex market, the euro weakened 0.60% against the US dollar to 1.0883, following the ECB’s decision to keep interest rates on hold and increase funding to Greek banks. The ECB kept its benchmark refi rate at its record low of 0.05%, as was widely expected, while at his post-meeting press conference President Mario Draghi said the central bank’s asset purchase program was proceeding smoothly, but gave no indication that there will be any early ending to the €60-billion-per-month scheme. Mr Draghi said that the ECB wants Greece in the eurozone and that debt relief for Greece was ‘necessary’ — the ECB is increasing its Emergency Assistance Liquidity (ELA) funding to Greek banks by €900m for one week. That move follows Greek MPs agreeing reforms to secure further bailout funds. Eurozone finance ministers have also agreed to a €7 billion ‘bridge’ loan to tide Greece over until the bailout funds can be rubber-stamped.
The progress made in dealing with Greece’s debt, along with the upbeat nature of Wall Street earnings, has helped lift stocks in New York in early trading. Shortly after the opening, the Dow Jones was up 48 points or 0.27% at 18,098, while the S&P 500 gained 0.61% to 2120.2.
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