Yellen sparks a decline on Wall Street

May 5, 2021 - 2 weeks ago
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Volatility increased on Tuesday on Wall Street triggered by U.S. Treasury Secretary Janet Yellen, who said U.S. interest rates may have to rise somewhat to keep the economy from overheating.

At the finishing bell, on the New York Stock Exchange (NYSE), the blue-chip Dow Jones Industrial Average closed +19.80 points, or +0.06%, higher to 34,133.03, bouncing close to 370 points from its intraday low of 33,765.68.

The broad-based Standard & Poor’s 500 Index slid -28 points, or -0.7%, to 4,164.66, while the rich-tech Nasdaq Composite Index dropped -261.61 points, or -1.9%, to 13,633.50, for its largest one-day decline since Wednesday, March 24, 2021.

Shares of Apple, the largest publicly traded company in the U.S., fell -3.54%, while Google-parent Alphabet lost -1.71%, Facebook shed slid -1.31%, and electric car maker Tesla dropped -1.65%, Nvidia and Intel lost -3.3% and -0.6%, respectively.

The yield on the US 10-year note slid 1 basis point to 1.58%.

The US. Treasury Secretary Janet Yellen suggested that interest rates may need to rise slightly to keep the economy from overheating early on Tuesday.

Those remarks triggered a modest decline on Wall Street led by tech shares.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy,” Yellen said in remarks webcast during The Atlantic’s Future Economy Summit.

But later in the day, Yellen was asked about the market reaction to the comments at a separate virtual conference said sees no inflation problem brewing, downplaying earlier comments.

She said a rise in interest rates “is not something that I am predicting or recommending”.

Janet Yellen, the first woman to head both the Federal Reserve and the Treasury Department, said no one respects the Fed’s independence more than she does.

Earnings season continues on Wednesday with reports out from General Motors, Hilton Worldwide, Allstate and Etsy.

While earnings have been coming in strong for the first quarter and companies have been raising guidance, stocks are not always moving upward following good news.

Private payroll data will also be released Wednesday, with the forecast seen at 800,000 private jobs added in April, compared to the 517,000 in March.

These numbers come ahead of Friday’s closely watched jobs report from the U.S., which will provide insights into the state of recovery of the labour market.

The Non-Farm Employment Change forecast is seen for a rise of 975,000, with the previous release at 916,000, while the Unemployment Rate forecast at 5.7%, with the last release at 6.0%.

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