Markets Are Tethered To The Words Of Janet Yellen

Markets that trade in New York and Chicago found themselves not so much down as they were downbeat in tone, searching for some direction other than Fed Chairwoman Janet Yellen’s hawkish rate comments yesterday before Congress.

U.S. equities, crude oil, gold and the rest of the precious metals complex were down moderately although palladium continued its headlong fall over the price cliff, off over 3% on the day.

There was one bright note worldwide. China's key Shanghai Composite trimmed gains to close up nearly 2% The latest rung up saw the index take the rally from its August 26 low to more than 20% in gains, meaning it is now technically in a bull market. The Nikkei, on the gravitational pull of China, and some very good domestic economic news in Japan, also rose – exactly 1.00%.

It’s no wonder that the precious metals and crude fell. The U.S. dollar was up again against the British pound by more than 1.00%, although it fell marginally against the euro. Although the euro holds primacy overall, the pound is important in the trading of commodities that list in London, New York and Chicago.

West Texas Intermediate crude is down about 2.5% and Brent North Sea is down not quite 1.00% on the day. Aside from currency fluctuations, an almost fantastically large oversupply/inventory in the U.S. is keeping prices low. In Europe, oil prices are at five-month lows due to oversupply and lower consumption patterns.

The U.S. exchanges seemed to be mulling the near-term fates of their component stocks. The Yellen comments seem to have spooked Wall Street, although we’re inclined to offer a bucket of freezing water over investors’ heads for not being more sanguine about the possibility of a rate hike.

We’ll make an early call on this, but we will go out on a limb and say that it’s time to start thinking about the next rate hike (after the one that hasn’t achieved liftoff yet.

Wishing you as always, good trading,