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September 25, 2015 | Market Rallies then Fades on News Yellen Expects Hikes This Year; Futures Still Imply No Hikes

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Stocks Rallied a bit today on news that Yellen still expects a hike this year, but have since given up those gains.

S&P 500 10-Minute Chart

 

Reuters reports Wall Street Up on Yellen Comments; Health Stocks Drag Nasdaq

U.S. stocks were higher in early afternoon trading on Friday after Federal Reserve Chair Janet Yellen said she expects interest rates to be raised this year, easing concerns about slowing global growth and prompting a rally in bank shares.

However, the continuing selloff in health stocks and a drop in Google’s shares due to a regulatory investigation limited gains on the Nasdaq.

Yellen said on Thursday that the Fed does not expect recent global economic and financial market developments to significantly affect its policy.

If the above chart holds the story after the closing bell will look like this: “Wall Street Down on Yellen Comments”.

Futures Still Imply No Hikes

A quick check of CME Fedwatch shows the Fed Fund Futures gave a big yawn to the notion Yellen is going to hike.

 

Fed fund futures did not change a bit. The CME still has the probability of a hike at 35%.

Bear in mind, those odds reflect a quarter point hike. I am of the opinion the Fed will hike in eighths, or possibly quarter point ranges starting not with a hike from the current 0%-.25% to .25%-.50%, but rather a hike to the range .125%-.375%.

That of course assumes the Fed will hike at all. If Yellen wanted to convince the market she was going to hike, she should not have given the market a litany of 10 reasons the Fed did not hike at the last meeting.

Mike “Mish” Shedlock

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September 25th, 2015

Posted In: Mish Talk

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