The stock markets in the United States declined due to the statement of Federal Reserve Chairperson Janet Yellen that she expects interest rates to increase this year. She also indicated that the frequency of further increases will be gradual.
Yellen said, “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate.” She also noted that the labor market is close to achieving a full strength, but she emphasized, “we are not there yet.”
The U.S. Federal Reserve is treading carefully with raising rates amid the widespread economic, macro and geopolitical uncertainties sweeping around the world. The Fed raised its target level as high as 20% in the early 1980s to deal with runaway inflation, but we're a far cry from that today — a time when inflation threatens Read More
Commenting on Yellen’s statement, Joe Bell, a senior equity analyst at Shaeffer’s Investment Research told Bloomberg, “The comment that a hike would be gradual might’ve eased some fears that maybe rates were going to increase quickly once they began.” He added, “We’ve pushed up against some resistance.” According to him, they are consolidating, and the market reaction will be moderate even with positive news.
Today, the Bureau of Labor Statistics of the Department of Labor reported that the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1% in April. The index for all items, less food and energy rose 0.3%, the biggest gain since January 2013. The data showed that the inflation is moving toward the goal of the Federal Reserve.
Michael Hanson, a senior economist at Bank of America commented, the data allowed policy makers to say that the” inflation is doing better” and they “seem awfully confident that labor markets are going to tighten, and inflation is going to pick-up.”
- Dow Jones Industrial Average (DJIA) – 18,232.02 (-0.29%)
- S&P 500- 2,126.06 (-0.22%)
- NASDAQ- 5,089.36 (+0.38%)
- Russell 2000- 1,252.24 (-0.36%)
- EURO STOXX 50 Price EUR- 3,679.14 (-0.26%)
- FTSE 100 Index- 7,031.72 (+0.26%)
- Deutsche Borse AG German Stock Index DAX- 11,815.01 (-0.42%)
- Nikkei 225- 20,264.41 (+0.30%)
- Hong Kong Hang Seng Index- 27,992.83 (+1.70%)
- Shanghai Shenzhen CSI 300 Index- 4,951.58 (+2.28%)
Stocks in Focus
Aeropostale declined more than 15% to $2.19 per share. The company reported lower-than-expected financial results for the first quarter. Aeropostale posted losses $0.57 per share and a 20% decline in revenue to $318.6 million.
The stock price of Rewalk Robotics surged more than 20% to $13.35 per share. Analysts at Canaccord Genuity raised their rating on the stock to Buy and raised their price target to $17 per share.
Jumei International Holding declined more than 9% to $25.40 per share despite reporting strong earnings for the first quarter, and stock rating upgrade from analysts at Macquarie as well as a price target increase from Piper Jaffray. Macquarie upgraded its rating for JMEI shares to Outperform while Piper Jaffray raised its price target to $25.