Market waiting on Yellen

February 24, 2015 09:02 AM

U.S. stocks fluctuated, the dollar strengthened and Treasuries fell before Federal Reserve Chair Janet Yellen speaks to lawmakers. European equities and bonds gained after an official involved in the talks said creditors approved an extension to Greece’s bailout program.

The Standard & Poor’s 500 Index rose less than 0.1% 9:31 a.m. in New York after Monday slipping from a record. The Bloomberg Dollar Spot Index increased 0.2%, while the yield on 10-year Treasuries rose two basis points to 2.08%. The Stoxx Europe 600 Index added 0.1%, while the rate on 10-year bonds from Portugal and Italy fell. U.K. natural gas jumped after Ukraine accused Russia of limiting fuel shipments.

Investors will be watching for clues on the timing of interest-rate increases as Yellen begins two days of Congressional testimony. The S&P 500 rose last week as minutes from the central bank’s last policy meeting fueled bets the Fed will keep rates lower for longer. Greek bonds extended gains after euro-region finance ministers approved the nation’s package of new economic measures and paved the way for an extension to the country’s bailout agreement.

“Obviously it’s going to be a crucial speech Yellen is offering up,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “If she talks about flexibility and the market perceives a June hike is still on the table, that obviously is bearish. Two- and five-year yields would be vulnerable for further increases.”

Yellen Testimony

Yellen will be making her semi-annual testimony before Congress after minutes from the central bank’s January meeting showed some policy makers argued for keeping rates low for longer amid risks facing the economy.

The Federal Open Market Committee pointed to a strengthening dollar, international flash points from Greece to Ukraine, and slow wage growth as weakening the case for the first rate rise since 2006. The FOMC said after its January meeting it “can be patient” as it considers when to raise the benchmark interest rate, even as it described the labor market as “strong.”

Data today is forecast to show consumer confidence probably slipped in February from its highest level since 2007, economists said in a Bloomberg survey.

“There’s a lot of grey area from the Fed’s comments last week,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said by telephone. “People are looking for a little more black and white from her comments today and tomorrow.”

Greek Agreement

In Europe, the agreement on Greece’s debt negotiations came on a conference call on Tuesday, according to an official involved in the talks who asked not to be named in line with policy.

Based on the provisional agreement between Greece and its official creditors on Feb. 20, the approval of the list was a condition for extending the availability of bailout funds for another four months.

Bonds of the euro area’s lower-rated nations rallied, led by Greece. The 10-year Greek yield fell for a fifth day, reaching 8.59%, the lowest since Jan. 26. Italian 10-year bond yields fell three basis points to 1.46% and Spain’s declined four basis points to 1.39%.

The Stoxx 600 extended its gains to a sixth day. BHP Billiton Ltd. rose 5% as the world’s biggest mining company reported first-half earnings that beat analysts’ projections. Telefonica Deutschland Holding AG added 3.6% after posting full-year revenue that beat estimates.

U.S. Equities

Among American stocks moving, First Solar Inc. rallied and SunPower Corp. jumped after the two largest U.S. solar-panel manufacturers are planning a joint venture and expect to register for an initial public offering for it.

Home Depot Inc. advanced after the largest U.S. home-improvement retailer reported quarterly profit that topped analysts’ estimates as consumers spent more on their homes.

The Nasdaq Composite Index climbed for a ninth straight day, its longest streak since September 2010, closing 1.7% away from its record high in March

Russia’s ruble fell 1.7% as trading resumed in Moscow after Moody’s Investors Service became the second rating agency to cut the country’s credit rating to junk on Friday. Offshore, the currency rose 0.9%, rebounding from a 2.6% decline on Monday. The dollar-denominated RTS Index slid 3.2%, extending last week’s retreat.

Ukraine, China

Ukraine’s hryvnia tumbled 15%. A military spokesman said a cease-fire with pro-Russian separatists isn’t working, disputing an announcement by rebel groups that they are withdrawing heavy weapons from the conflict zone.

The Hang Seng China Enterprises Index rose less than 0.1% in Hong Kong. Taiwan’s benchmark gauge rose 1.1% as trading resumed trading today following Lunar New Year holidays. Mainland Chinese markets reopen tomorrow.

U.K. next-month gas jumped as much as 3.7%, the most since Feb. 12. Ukraine’s state gas company said Monday that OAO Gazprom, its Russian counterpart, broke a supply deal by limiting shipments to less than half the level demanded. A halt in flows between the countries would risk disruption to supplies in Europe.

West Texas Intermediate crude oil for April delivery rose 0.3% to $49.60 a barrel. Brent, the benchmark for more than half of global oil, climbed 1% to $59.47 in London.

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