Wall Street dips on Yellen focus

Specialist Jason Hardzewicz, left, and trader Michael Zicchinolfi work on the floor of the New York Stock Exchange. File photo / AP
Specialist Jason Hardzewicz, left, and trader Michael Zicchinolfi work on the floor of the New York Stock Exchange. File photo / AP

Wall Street began the week lower as investors awaited today's testimony of the US Federal Reserve's new chairman, Janet Yellen, to gauge the central bank's take on the recent weakness in employment data and the overall outlook for the US economy.

Yellen, who took the helm on February 1, will provide the Fed's semi-annual testimony to the House Financial Services Committee tomorrow and the Senate Banking Committee on Thursday (US time).

The most recent monthly government employment data were disappointing, as the growth of payrolls was far short of expectations in both December and January.

While severe winter weather is partly, perhaps largely, to blame, improvement in the labour market was a key driver for US policy makers to start reducing their monthly bond purchases, announcing a downgrade of US$10 billion each after the most recent FOMC meetings in December and January respectively.

"Markets are just looking to Yellen's testimony this week-that's going to be the key event," Geoffrey Yu, senior currency strategist at UBS in London, told Bloomberg News. Markets may be on a "defensive tone because she's got to acknowledge some weak figures of late."

Overall, investors have remained optimistic about the US economic outlook, as well as for corporate profits.

In afternoon trading in New York, the Dow Jones Industrial Average fell 0.14 per cent, while the Standard & Poor's 500 Index slipped 0.08 per cent. The Nasdaq Composite Index added 0.31 per cent.

The S&P 500 could reach 1,900 in the next quarter, money manager Laszlo Birinyi told Bloomberg. "We've had a little bit of a detour and the road isn't as smooth as it has been, but we still think the rally is intact," Birinyi said.

US Treasuries moved higher, pushing the yield on the 10-year bond 1 basis point lower to 2.67 per cent.

Slides in shares of UnitedHealth, last 2.1 per cent weaker, and those of Exxon Mobil, last 1.1 per cent lower, led the decline in the Dow.

Shares of McDonald's also fell, last down 0.9 per cent, as the company reported a decline in same-store sales for the third straight month citing "broad-based challenges including severe winter weather."

Meanwhile, shares Apple gained, last up 1.9 per cent, after Carl Icahn dropped his call for the company to buy back US$50 billion of its shares.

In Europe, the Stoxx 600 Index finished the session with a gain of less than 0.1 per cent from the previous close. France's CAC 40 rose 0.2 per cent, while the UK's FTSE 100 added 0.3 per cent. Germany's DAX slipped 0.1 per cent.

Here, shares of L'Oreal, up 4.5 per cent, helped boosted the market. Nestle was said to explore ways to reduce its 29 per cent stake in the biggest cosmetics maker, Bloomberg News reported.

- BusinessDesk

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