Yellen signals growing likelihood of a December rate hike

The Dow Jones industrial average fell 250.47 points, or 1.41 percent, after briefly falling more than 300 points; the S&P 500 lost 29.75 points, or 1.43 percent; and the Nasdaq Composite dropped 85.70 points, or 1.67 percent.

And so as much as the economic situation right now calls for action from the Fed, raising rates will be something of a coronation for the economy’s long slog back from the depths of the worst recession since the Great Depression. The motive in the killings was unclear.

“This is clearly a shift compared to September when the global worries were prevalent”, said Thomas Costerg, senior USA economist at Standard Chartered Bank in NY. With the rate now set at just 0.10-0.25 per cent, an upward move or two would still leave U.S. interest rates very low.

“I anticipate continued economic growth at a moderate pace that will be sufficient to generate additional increases in employment, further reductions in the remaining margins of labor market slack, and a rise in inflation to our 2 percent objective”, Yellen said.

US Federal Reserve chairwomen Janet Yellen has told Congress that the economy is reaching a point where it can handle an interest rate rise. Nonetheless, she maintained in her speech Wednesday that upcoming data could still sway the Fed’s decision on interest rates. These data include a range of indicators regarding the labor market, inflation, and economic activity. That’s a market trying to decipher where we are headed but the road is going to be choppy…. On Friday, the government’s jobs report for November should offer some clues about whether the modest pay gains will continue.

According to sources cited by the Wall Street Journal, IAC/InterActive and Verizon Communications are among the companies interested. The central bank also extended its asset purchase program by six months (through March 2017). “We had pretty high expectations….”

Oil on the rebound: In other markets, USA crude (http://www.marketwatch.com/story/crude-prices-retake-40-a-barrel-but-gains-may-not-last-2015-12-03) recaptured the $40-a-barrel mark, pushing higher as investors sought bargains in the wake of Wednesday’s fallout (http://www.marketwatch.com/story/crude-prices-slip-as-traders-brace-for-bigger-stockpiles-2015-12-02) and as leaders from the Organization of the Petroleum Exporting Countries begin to gather. Yellen also gave a grace note, perhaps as a nod to those eager to see a rate increase, said “In that sense, it is a day that I expect we all are looking forward to”. At that level, the unemployment rate is near the median of Federal Open Market Committee (FOMC) participants’ most recent estimates of its longer-run normal level.

In Europe, the European Central Bank cut its deposit rate deeper into negative territory (by 0.1 percent to -0.3 percent) in line with estimates but less than the whispers of a 0.2 percent cut.

The German 10-year yield jumped above 0.6 percent. European stocks fell, and the euro rose.

“It’s nearly as if Yellen and Draghi were coordinated….”

“It does have the potential to have a significant economic effect”.

One issue keeping the growth down has been weak net exports at a time that foreign economic growth has slowed.