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US shares pare losses to end flat-to-firmer after Yellen signals rate hike

Last updated: 21:20 03 Mar 2017 GMT, First published: 08:55 03 Mar 2017 GMT

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US stocks pared initial losses to end flat to firmer on Friday, with the Dow just clutching onto its 21,000 milestone, after the Federal Reserve as good as signalled rates will be going up this month.

In her remarks at the Executives’ Club of Chicago on Friday, Fed chair Janet Yellen said an increase in short-term interest rates was likely to be “appropriate” at this month’s meeting as long as “employment and inflation are continuing to evolve in line with “officials’ expectations,”.

Those words pushed the odds, as measured by Fed funds rates, of a rate rise in March to 96%. Expectations were so overweight that should the Fed hold rates on March 15 it would send the markets into panic selling.

The S&P 500 market bellwether ended flat at 2383 while the Dow Jones Industrial Average also ended flat at 21,005. It broke above 21,000 for the first time earlier this week.

But the tech-heavy Nasdaq Composite mustered gains to end up 0.2% at the session high of 5,870.75.

With the S&P 500 flat, the more indicative illustration might be the top-traded stock this session. That goes to Bank of America (NYSE:BAC), which ended up 0.8% at $25.43 on volumes of 81mln shares. Still, that was below the average daily traffic of 100mln, and helped to underscore that even if banks are lapping up prospects for a rate hike investors had remained largely sidelined this session awaiting Yellen.

Meanwhile, General Motors’ (NYSE:GM) shares closed up 1.2% at $38.23 after France’s PSA was rumoured to be planning to announce an agreement to buy General Motors’ loss-making Opel division on Monday, in a move that will make the Peugeot and Citroen owner the second-largest carmaker in Europe.

Shares of cosmetics giant Revlon (NYSE:REV) ended down 4.1% at $32.65 after it reported slipping sales in the crucial North American consumer market.

The beauty giant said consumer net sales in North America fell 9% year-on-year during the three-month to end of December 31 as shoppers increasingly turn to specialty stores and online retailers for their make-up and hair colour fixes.

The S&P Midcap 400 closed up 0.05% at 1739 and led by Tenet Healthcare Corp (NYSE:THC), up 9.8% to $20.99.

Tenet led after its “hold” rating was reiterated by brokers at RBC Capital Markets in a report released on Friday. They presently have a $25.00 target price on the stock. RBC Capital Markets’ target price indicates a potential upside of 30.75% from the stock’s previous close.

Meanwhile, the S&P Smallcap 600 finished 0.3% lower at 849 and led by Impax Labs Inc (NASDAQ:IPXL) down 14.4% at $8.00.


Early trading

US markets opened weaker on Friday, with investors wary ahead of a key speech from Federal Reserve chair Janet Yellen at 1300 ET (1800 GMT) in Chicago.

Yellen speaks at the Executives Club of Chicago on the topic of the Fed's economic outlook, investors will parse her words for any hint of how likely the central bank is to raise its key short-term rate after it next determines rates on March 15. Fed futures are pricing in a 90% chance of a hike this month.

That hunch had added meaning on Friday after the ISM non-manufacturing PMI for February printed 57.6 – above a forecast for 56.5 and January’s 56.5 reading.

The S&P 500 market bellwether was down 0.3% at 2375 and led by Costco Wholesale Corp (NASDAQ:COST), down 4.1% to $170.69 after delivering a second successive quarter of negative earnings which surprised the market as earnings and revenues missed estimates.

The Dow rose initially – but never enough to threaten a fresh record high – and was last down 0.2% on the day at 20,971 – below the 21,000 milestone it passed at the start of the week. Meanwhile, the tech-heavy Nasdaq Composite was down 0.3% at 5845.

The S&P Midcap 400 fell by 0.3% to 1732 and was led by Advanced Micro Devices (NASDAQ:AMD) down 6.6% to $12.99 extending losses from the previous session when shares already tumbled by 7%. The share price declines came after the launch of their new Ryzen line of desktop CPUs disappointed on Thursday, with some technology reviewers unhappy about the poor gaming performance.

The S&P Smallcap 600 was down 0.6% at 846 and led by discount retailer Fred's Inc (NASDAQ:FRED) fell 8.4% to $16.79 following weak sales reported the previous session.


Pre-Open

US stocks are indicated softer on Friday as they bide time ahead of a key speech from Federal Reserve chair Janet Yellen.

The S&P 500 and Nasdaq Composite are indicated down 0.2% while the Dow is likely to open flat to firmer.

The Dow would need to advance another 130 points to produce a fresh record high, after it hit 21,129.20 early in Thursday trading and then gave it all back with a slide, ending down 112 points on the day and just above this week’s fresh milestone of 21,000.

The US ISM non-manufacturing Purchasing Management Index for February is due at 1000 ET (1500 GMT) and forecast to be and is forecast to be unchanged from the January number of 56.5. A figure above 50.0 indicates economic expansion.

A slew of US central bankers will be speaking through the New York morning, including Jeffrey Lacker, Charles Evans, Jerome Powell, Stanley Fischer, and later, Yellen herself at 1300 ET (1800 GMT).

When Yellen speaks at the Executives Club of Chicago on the topic of the Fed's economic outlook, investors will parse her words for any hint of how likely the central bank is to raise its key short-term rate after it next meets March 14-15.

Fed futures have begun pricing in a 90% chance of a hike this month as the US economy shows no signs of letting up.

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