Yellen: Slower rate hikes if economy disappoints

“I think we want to be careful not to jump to a premature conclusion about what is in store for the USA economy”. But Yellen’s remarks addressed investors’ concerns, said Erik Davidson, chief investment officer for Wells Fargo Private Bank.

“The general message she meant to deliver is that additional rate hikes remain the base case, but markets have to stabilize before we see more”, said Cornerstone Macro analyst Roberto Perli.

The Feb. 10 testimonial was the first since the Fed pushed interest rates higher in December 2015.

The Dow is down 1,510.29 points, or 8.7 percent. The Standard & Poor’s 500 index is down 9.4 percent. That was enough to push the unemployment rate down to 4.9 percent. And the tech-heavy Nasdaq has plunged 14.8 percent.

A Bloomberg gauge of the dollar versus 10 major peers was near its lowest level since November after Yellen’s comments initially buoyed American stocks, before they retreated into the close.

Yellen’s testimony marked the first of two days of testimony she will give to Congress. Her appearance marked her first public comments since December, when the Fed raised rates for the first time in almost a decade.

The Fed chair noted an optimistic outlook for USA incomes and spending.

With Janet Yellen’s testimony to lawmakers and conflicting signals about the economy, it is likely the Fed is keeping their rate hike options open as new economic data and market developments are reviewed over the next few weeks.

Her reiteration that monetary policy was, “not on a pre-set course”, was a still a dovish sign, that the Fed might find it necessary to alter it trajectory at any time if incoming data warranted it.

Indeed, the Fed chair bluntly dismissed questions of whether there could be a need to actually reduce rates, even into negative territory as the Japanese and European central banks have done. The Fed “expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in coming years and that labor market indicators will continue to strengthen”, Yellen said. The yields have fallen from 2.30 percent at the beginning of the year as stock and oil prices have slumped on mounting fears about global growth. It added $8.39 to $47.96. The dollar’s fall has been most notable against the yen, which had been depressed at low levels over a long period because of the Bank of Japan’s aggressive monetary easing since 2013. Disney dropped 3.3 percent a day after it reported that its ESPN network has hit a soft patch. The stock was the biggest decliner in the Dow, sliding $3.47 to $88.85. Time Warner recovered somewhat from an early slide. In Asia, Japan’s Nikkei 225 sank 2.3 percent and is down about 11 percent in the past month.

Europe’s broad FTSEurofirst 300 index ended up 1.78 percent, at 1,241.49.

The currency traded in Hong Kong advanced 0.09 percent to 6.5398, data compiled by Bloomberg show.

METALS: Precious metals prices closed lower.

MSCI’s all-country world equity index, which tracks shares in 45 nations, was last down 0.35 points or 0.1 percent, at 358.08. By midday it was down 0.4 percent after its revenue fell short of forecasts.

Treasury yields dipped after the U.S. Treasury sold $23 billion in 10-year notes to solid demand, showing the dramatic drop in yields this year has not scared away investors. The dollar edged up to 114.65 yen from 114.95 yen, while the euro fell to $1.1217 from $1.1289 the day before.