MARKETS AT A GLANCE
(Data as of approximately 5 p.m. ET)
SNAPSHOT:
U.S. stocks, government bonds and gold prices rose while the dollar fell Tuesday after Federal Reserve Chairwoman Janet Yellen said global economic uncertainty warranted a cautious approach to raising interest rates. Oil prices fell to a two-week low on concerns that the global market remains too oversupplied to support prices near $40 a barrel.
OPENING CALL:
China’s efforts to exploit low commodity prices to secure its long-term iron supply will weigh on the dry bulk shipping market, says Ukrainian research firm UkrAgroConsult. It cites reports that Chinese shipping companies ordered construction of 30 very large ore carriers to import iron ore procured under new long-term supply agreements with Brazilian miner Vale. The move will “help China avoid further possible fluctuations of transportation cost, and as a result reduce the cost of imported ore,” UkrAgroConsult says. “Considering the dominant influence of iron ore transportation cost on the entire bulk market … freight rates are unlikely to increase to record levels on the dry bulk market.”
EQUITIES:
U.S. stocks rose after Janet Yellen said global economic uncertainty warranted a cautious approach to raising interest rates.
The Federal Reserve chairwoman’s remarks at the Economic Club of New York came after other Fed officials gave upbeat assessments of the U.S. economy in recent days and left the door open to a rate increase as soon as April.
“The market is properly interpreting this as being prudent,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. “She views the risks as such that there’s no reason to hurry a rate hike.”
The Dow industrials and the S&P 500 closed at their highest levels of the year and the S&P 500 returned to positive territory for 2016, up 0.5%.
The Dow Jones Industrial Average rose 97.72 points, or 0.6%, to 17633.11, after being down as much as 101 points early in the session. The S&P 500 climbed 17.96, or 0.9%, to 2055.01 and the Nasdaq Composite rose 79.84, or 1.7%, to 4846.62.
Ms. Yellen “effectively eliminated April at this point as a likely meeting for a rate increase,” said Christopher Sullivan, who manages $2.3 billion as chief investment officer at United Nations Federal Credit Union.
The KBW Nasdaq Bank index of large U.S. commercial lenders declined 0.8%. Higher interest rates tend to increase the difference between what banks charge on loans and pay on deposits. Bank of America declined 1.5%, and Wells Fargo fell 1.3%.
Asia stock markets ended mixed Tuesday as investors weighed when the U.S. central bank might next raise interest rates.
FOREX:
The dollar fell after Federal Reserve Chairwoman Janet Yellen reiterated her cautious stance on the global economy and pointed to a slower path in raising interest rates.
The WSJ Dollar Index, which measures the dollar against a basket of 16 currencies, fell 0.9% to 87.01 as the U.S. currency fell against all major peers. The pound rose 0.9% to $1.4383, while the dollar fell 0.7% against the yen to ¥112.685.
In a speech at the Economic Club of New York, Ms. Yellen said global economic and financial uncertainties justify taking a slower path to raising interest rates. The comments echo Ms. Yellen’s cautious tone at the Fed’s latest policy meeting in mid-March, which surprised many investors and sent the dollar tumbling. A number of speeches from Fed officials last week, however, had reignited hopes that the central bank could raise rates at its April or June meetings.
Higher rates boost the dollar by making it more attractive to yield-seeking investors.
Omer Esiner, chief market analyst at Commonwealth Foreign Exchange, wrote in an email that Ms. Yellen’s comments “do not sound consistent with a looming rate hike in April and leave considerable doubt about whether rates will rise in June.”
Fed-funds futures, used by investors and traders to place bets on central-bank policy, now show a 5% likelihood of a rate increase at the Fed’s April policy meeting, according to data from CME Group. There was a 12% chance Monday.
The speech comes in a data-heavy week, which will wrap up with the highly anticipated manufacturing production and jobs reports on Friday.
On Tuesday, a report showed that the S&P/Case-Shiller Home Price Index rose 5.4% in the 12 months ended in January, indicating that tight inventory will continue to result in rising prices and sales volatility this year.
Meanwhile, the Conference Board’s index of consumer confidence rose to 96.2 in March from an upwardly revised 94.0 in February, topping economists’ expectations.
The dollar also fell against many emerging-market currencies. The dollar was recently down 1.9% against the South African rand to 15.1664 rand. The dollar was down 0.7% against the Indian rupee to 66.15 rupees.
BONDS:
U.S. government bond prices rallied broadly, sending the yield on the benchmark 10-year Treasury note to a one-month low, as investors cheered Federal Reserve Chairwoman Janet Yellen’s cautious stance in raising interest rates.
The yield on the two-year note, highly sensitive to expected changes in the Fed’s policy outlook, also settled at the lowest level in a month. Yields fall as bond prices rise.
Mr. Yellen said in New York on Tuesday that global uncertainty justifies a gradual path in rate increases. Bond traders said the remark delivered some reassurance that the central bank isn’t in a hurry to tighten monetary policy. Higher interest rates from the Fed tend to shrink the value of outstanding bonds.
Bond traders had fretted in the past couple of weeks after the Fed’s mixed messages. The central bank signaled hesitance to raise rates in its policy meeting earlier this month, but last week, several Fed officials said a rate increase as soon as April isn’t off the table.
Ms. Yellen “brought the market back to earth,” said Todd Colvin, senior vice president at futures brokerage firm Ambrosino Brothers in Chicago. “The tone is very dovish.”
The prospect of a slowly moving Fed also boosted U.S. stocks.
The yield on the benchmark 10-year note settled at 1.814%, compared with 1.870% Monday. The yield on the two-year note closed at 0.796%, compared with 0.869% on Monday.
COMMODITIES:
Oil prices fell to a two-week low on concerns that the global market remains too oversupplied to support prices near $40 a barrel.
Prices have rallied sharply in recent weeks on expectations that major oil producers would agree to freeze production and U.S. oil production would start dropping more quickly due to spending cuts. But some analysts and traders warned that the price gains were unsustainable because the global glut of crude persists, with storage facilities close to full around the world.
U.S. crude inventories stand at the highest level in more than 80 years, and storage tanks in the key storage hub of Cushing, Okla., are near full capacity. Government inventory data for the week ended March 25 is due Wednesday.
Government inventory data for the week ended March 25 is due Wednesday, and analysts surveyed by The Wall Street Journal expect the agency to report that U.S. crude stockpiles rose by 3.5 million barrels in the week, while supplies of gasoline and distillates, including heating oil and diesel fuel, fell.
The American Petroleum Institute, an industry group, is scheduled to release its inventory data for the same period later Tuesday.
Light, sweet crude for May delivery settled down $1.11, or 2.8%, at $38.28 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell $1.13, or 2.8%, to $39.14 a barrel on ICE Futures Europe.
Both contracts settled at the lowest level since March 15.
Gold prices extended gains, lifted by dovish comments from Federal Reserve Chairwoman Janet Yellen.
TODAY’S HEADLINES:
Yellen: Uncertainty Justifies Slower Rate Increases
Global uncertainty has heightened the risk to the U.S. economy, making a cautious approach to rate increases “appropriate,” Fed Chairwoman Janet Yellen said.
High-Court Split Shields Mandatory Public-Union Fees
Public employee unions survived a threat to their power in nearly half the country as the Supreme Court deadlocked on a lawsuit designed to abolish their ability to require compulsory dues in more than 20 states.
HSBC Struggles to Bring Money-Laundering Vigilance Up to Snuff
A monitor of HSBC’s vigilance against money laundering and evasion of sanctions has uncovered lapses in the wake of a 2012 settlement with the Justice Department.
Wells Fargo to Pay $8.5 Million in Phone Recording Case
Wells Fargo will pay $8.5 million to settle allegations from California’s attorney general that the bank improperly recorded telephone calls without informing California consumers.
FTC Sues VW Over Diesel Vehicle Advertising
The Federal Trade Commission added to Volkswagen’s legal woes with the filing of a complaint claiming the auto maker’s advertising falsely touted its diesel vehicles as environmentally friendly.
Spotify Raises $1 Billion in Debt Financing
Music-streaming site Spotify has raised $1 billion in convertible debt from investors, a deal that extends the money-losing company’s runway but comes with some onerous guarantees.
U.S. Home Price Index Continued Steady Climb
Home prices continued rising at a steady clip in January, according to the S&P/Case-Shiller Home Price Index—another early sign that 2016 will offer more of the same in the housing market: tight inventory leading to rising prices and volatility in the volume of sales.
Foxconn’s Price Tag for Sharp Could Initially Fall by More Than $2 Billion
The boards of Sharp and Foxconn will meet separately on Wednesday to discuss a revised takeover package that could initially shave more than $2 billion off the nearly $6 billion price for Japanese electronics maker Sharp.
U.S. Consumer Confidence Rose in March
Consumer confidence rebounded in March, as Americans regained optimism about the short-term outlook for the economy.
Norfolk Southern Steps Up Fight Against Canadian Pacific Merger
Norfolk Southern urged employees to vote down Canadian Pacific Railway’s effort to enlist shareholders to press the board for friendly merger talks at its annual meeting.
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TODAY’S CALENDAR
(Times in GMT, followed by country and event)
2145 NZ Feb Building Consents Issued
2350 JPN Feb Preliminary Industrial Production
2350 JPN Mar Provisional Trade Statistics for 1st 10 days of Month
0030 JPN Feb Detailed Import & Export Statistics
0400 JPN Feb Auto exports
0400 JPN Feb Auto production
0600 JPN Feb Steel Imports & Exports Statistics
0700 THA Feb Industrial Production Index
0700 GER Mar Saxony CPI
0800 GER Mar Hesse CPI
0800 GER Mar Brandenburg CPI
0800 GER Mar Bavaria CPI
0830 GER Mar North Rhine Westphalia CPI
0830 UK Feb Land Registry House Price Index
0900 EU Mar Business & Consumer Surveys – Business Climate Indicator &
1100 US 3/25 MBA Weekly Mortgage Applications Survey
1200 GER Mar Provisional CPI
1215 US Mar ADP National Employment Report
1245 US U.S. Treasury Sec Lew delivers address on sanctions
1400 US Mar Online Help Wanted Index
1430 US 3/25 EIA Weekly Petroleum Status Report
1700 US Federal Reserve Bank of Chicago President Charles Evans speech at the Forecasters Club of New York Luncheon
1900 US Mar Agricultural Prices
2305 UK Mar UK Consumer Confidence Survey
