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US shares close week lower after investors see Fed double-vision

Last updated: 16:57 26 Aug 2016 EDT, First published: 11:57 26 Aug 2016 EDT

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US stocks closed Friday and the week lower, after the Federal Reserve’s attempts to prime markets for a rate hike backfired when two officials entered the fray.

US stocks had already priced in a hawkish stance from Fed chair Janet Yellen before she spoke at 1000 ET so the market was relatively relaxed by her balanced performance.

Yellen told a Kansas Fed symposium at Jackson Hole, Wyoming at 1500 hours London time that arguments for a US rate rise have strengthened as the US labour market continued to improve – and after hawkish comments from host central banker Esther George this week and those of other regional Fed leaders in the past month, those latest comments were actually read as dovish.

But then Yellen’s influential number two, Stanley Fischer, said there was a possibility that next Friday’s non-farm payrolls could tilt the central bank towards a hike a soon as September 21. He also hinted that more than one hike in 2016 was conceivable.

The result was the S&P 500 index wiping out session gains and ending down 0.2% at 2,169.

The S&P Midcap 400 closed down 0.3% at 1,559, while the S&P Smallcap 600 ended down 0.3% at 751.

The silver sector rose nearly 2% on Friday. The top performer in the sector was Great Panther Silver Ltd (NYSE:GPL), which gained more than 7.2% and closed up 4% at $1.29 after silver futures gained 2.4% to trade at $19.06 an ounce.


Midsession

Wall Street tickers turned red at midsession on Friday after Fed vice-chair Stanley Fischer hinted a US rate hike could come as soon as September – and more than one could land in 2016.

US stocks had already priced in a hawkish stance from Fed chair Janet Yellen before she spoke at 1000 ET (1400 GMT) so the market was relatively relaxed by her balanced performance.

But then influential Fischer, who already made hawkish comments within the past week reinforced the possibility that next Friday’s non-farm payrolls could tilt the central bank towards a hike a soon as September 21.

The S&P 500 index was down 0.2% at 2168.

Meanwhile, the S&P Midcap 400 was down 0.2% at 1561 and led by Brocade Comm Systems (NASDAQ:BRCD) down 11.7% to $9.24.

The S&P Smallcap 600 was down 0.24% to 752 and led by Aceto (NASDAQ:ACET) down 21.6% to $20.15.


Open

US shares joined global indices in going higher on Friday after Janet Yellen's speech cheered.

The Dow Jones  added 0.47% to 18,535. The S&P500 gained 0.49% to 2,183 and the Nasdaq added 0.57% to 5,241.

In London, FTSE 100 added 0.45% to 6,846.

Speaking from the Jackson Hole economic symposium, Yellen said: “In light of the continued solid performance of the labour market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.”

It would be normal for gold to tank after comments like those, but it appeared investors were less than convinced that a rise before the end of the year is a guarantee, especially after Yellen later noted concerns about low business investment and declining productivity.

“She stated that in her opinion the case for a rate hike has strengthened in recent months,” said Aberdeen Asset Management’s James Athey.

“But the lack of any specific signal with regards to the September meeting means markets are unlikely to react adversely to this fairly throwaway comment,” he added.


MARKET PREVIEW

Wall Street shares are set for a lower start as markets are jittery ahead of Janet Yellen's speech.

The Fed chair is set to speak at the Banker Symposium in Wyoming and all ears are on what she may say on the state of the global economy in the light of not a great deal of growth and interest rates are low.

Brexit - or the UK's decision to leave the EU - may also feature in her words.

What will really be of interest is whether she hints at a US rise on September 21.

Her remarks will follow data which indicates the US economy may have perked up after a weak start to 2016.

A report on Thursday showed durable goods orders, a proxy for investment, climbed more than expected in July. Yellen will speak at 1000 ET (2pm GMT) on Friday.

The Dow Jones closed down 33 on Thursday, at 18,448, while the tech-heavy Nasdaq lost around five at 5,212. The S&P500 index was down almost three points at 2,172.

In futures trading today, the S&P500 lost 0.5; the Nasdaq shed three and the Dow Jones is trading down seven points.

US crude - West Texas Intermediate- is down 0.38% at the time of writing at US$47.15 a barrel.

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