While you were sleeping: Fed hike in April?

Tuesday 22nd March 2016

Wall Street was mixed, while US Treasuries fell, as Federal Reserve Bank of Atlanta President Dennis Lockhart said the US economy might warrant an interest rate hike as early as April.

“In my opinion, there is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April,” Lockhart said in prepared remarks for a speech in Savannah, Georgia.

Last week a statement at the end of the latest two-day Federal Open Market Committee meeting showed that the median forecast now included two rate increases this year, down from four predicted in December.

“I would argue that the real economy—the Main Street economy—remains substantially on the path envisioned by Committee participants at the time of the liftoff decision in December,” Lockhart said. “However, the context of risks and uncertainties has shifted somewhat. In my view, this explains the Committee's changed sentiment regarding the speed of normalisation, the pace of rate increases.”

Wall Street was mixed. In 12.57pm New York trading, the Dow Jones Industrial Average inched 0.04 percent higher, while the Nasdaq Composite Index also eked out a 0.04 percent gain. In 12.42pm trading, the Standard & Poor’s 500 Index slipped 0.13 percent.

Meanwhile, US Treasuries fell, pushing 10-year yields three basis points higher to 1.90 percent.

"Our market is really resting on the back of the dovish statement from the Fed and waiting to see where we are headed with the economic data," Lisa Kopp, head of traditional investments at US Bank Wealth Management in Minneapolis, told Reuters.

In the Dow, gains in shares of Nike and those of Boeing, last up 3.1 percent and 1.7 percent respectively, offset declines in shares of Chevron and those of DuPont, down 1.7 percent and 1.3 percent respectively.

Shares of Starwood Hotels & Resorts Worldwide climbed, last up 3.9 percent, after the company said it agreed to a sweetened US$13.6 billion takeover offer by Marriott International, an improvement spurred by an upgraded rival offer from a consortium led by China’s Anbang. Shares of Marriott last traded 1.5 percent lower.

Starwood “has found itself in the middle of a bidding war,” Tim Craighead, a research director at Bloomberg Intelligence, said in a report. “A Marriott-Starwood combination would create a diversified, asset-light lodging behemoth focused on expanding its base of fees and managed and franchised hotels. A takeover by Anbang Insurance may cloud the long-term growth picture.”

In other deal news, shares of Valspar soared, last up 24.2 percent, after Sherwin-Williams agreed to buy the company for about US$9.3 billion.

In the latest housing data, a National Association of Realtors report showed US existing home sales sank 7.1 percent to an annual rate of 5.08 million units, the lowest level since November.

“Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest,” Lawrence Yun, NAR’s chief economist, said in a statement. “The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February’s lack of closings.

"However, the main issue continues to be a supply and affordability problem," Yun noted. "Finding the right property at an affordable price is burdening many potential buyers.”

Europe’s Stoxx 600 Index ended the day with a decrease of 0.3 percent from the previous close as energy and mining stocks fell. Germany’s DAX Index slipped 0.02 percent, the UK’s FTSE 100 Index inched 0.08 percent lower, while France’s CAC 40 Index fell 0.8 percent.

Shares of Bayer gained, up 3.2 percent, while those of BASF also gained amid reports Monsanto has explored possible deals with the German companies.

BusinessDesk.co.nz

Comments from our readers

No comments yet