Wall Street shares were clinging onto gains at midsession on Tuesday, underwhelmed by the lack of certainty in the Federal Reserve’s economic and monetary outlook after the central bank’s chair Janet Yellen read testimony before the US Senate.
The market bellwether S&P 500 index was up 0.13% at 2,086, but halving the gains seen ahead of Yellen’s Congressional speech.
In a process she will repeat with the House of Representatives on Wednesday, Yellen clarified before the Senate Banking Committee that she is not taking sides ahead of Britain's June 23 vote on whether to quit the European Union, but that the US central bank is monitoring the situation carefully.
Yellen was cautious, saying she doesn't "want to overblow the likely impact" of a Brexit. She said that whatever Britons decide will have "economic consequences that would be relevant to the US economic outlook."
Yellen said, however, that she does not believe that the US would see a "Brexit-induced" recession.
On Tuesday, the European Central Bank confirmed that it had arranged contingency plans with the Bank of England – the first time the eurozone’s central bank had acted in such a concerted way with currency swaps with the BoE in 2009 in the credit crisis.
A host of central bankers from Japan to Switzerland have said they stand ready to provide additional liquidity to financial markets should the UK vote to leave the EU on Thursday.
The Financial Times’ poll of polls indicates that while Remain has made inroads in the past week to reclaim the high ground, the overall barometer suggests a narrow lead of 45% for Leave to 44% for Remain in the EU.
In spite of the attempts to calm lawmakers, Yellen’s attachment to the word “uncertainty” is making investors twitchy.
As a result, smaller cap stocks nursed losses at midsession. The S&P Midcap 400 was down 0.2% at 1,492, and led by Werner Enterprise (NASDAQ:WERN), down 9.9% at $22.23.
The S&P Smallcap 600 shed even more, 0.6%, to 705 and led south by Impax Labs Inc (NASDAQ:IPXL) down 12.2% to $28.05 after the pharmaceutical company announced it is buying for $586mln a portfolio of generic products from Teva Pharmaceutical Industries (TLV:TEVA) and affiliates of Allergan PLC (NYSE:AGN) as well as the return to Impax of its rights to its pending abbreviated new drug application for the generic equivalent to Concerta (methylphenidate hydrochloride).
Stocks were also subdued on account of weaker oil prices. The US benchmark WTI was down 1.6% at $48.58.
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Ahead of a speech by Federal Reserve boss Janet Yellen this morning, stocks have added to yesterday’s handsome gains. The S&P 500 was up three points at 2,086 and the Dow Jones industrial average was 21 points firmer at 17,826. On the NYSE, communications and information technology services group Neustar Inc (NYSE:NSR) was wanted after it informed investors that it plans to separate into two independent publicly traded companies. The “A” shares were 6.8% higher at $25.65. On Nasdaq, a near quadrupling of the share price of Delta Technology Holdings Limited (NASDAQ:DELT) followed the announcement that the Chinese company is dedicating existing production capacity to produce up to 500 tons per year of prothioconazole, a wide spectrum triazoline-thione germicide used to prevent and cure crop diseases. In contrast, Impax Laboratories Inc (NASDAQ:IPXL) lost a little more than a tenth of its value as it agreed to buy a portfolio of drugs from Israel’s Teva Pharmaceutical Industries Ltd and Ireland’s Allergan PLC (NYSE:AGN) for $586mln. Preview Stocks are set to build on yesterday’s strong gains, despite a sharp fall in the price of oil, down 1.6% at $48.57 a barrel. Janet Yellen, the head of the Federal Reserve, is set to testify this morning before the US Senate Committee on Banking, Housing and Urban Affairs, but that does not seem to have prompted any reticence on the part of investors, judging by spread betting quotes, which point to a 57 point rise for the Dow and a near eight point advance for the broader-based S&P 500. “Expectations have rapidly diminished over the Fed raising US rates in Q2 and the ongoing Brexit developments have sabotaged all efforts by the central bank to take action,” suggested Lukman Otunuga, a research analyst at forex trading platform FXTM. “Although data in the States has followed a positive path, the global instabilities and potential threats of a Brexit to the global economy continues to force the central bank to re-evaluate its stance,” Otunuga added. In corporate news, house builder Lennar Corporation (NYSE:LEN) cheered the market with news that the number of home sales secured in its fiscal second quarter was up 12% year-on-year, with the average price rising 4.0% to $364,000. The shares were up 2.9% in pre-market trade, as earnings per share numbers (EPS) beat market expectations. The market had been expecting EPS of 86 cents, which the company beat by nine cents.