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Financial Markets Mixed; U.S. CPI Data Solid; Yellen Speech Next

By:
James Hyerczyk
Updated: Jan 18, 2017, 18:40 UTC

The financial markets traded mixed on Wednesday as investors digested a number of U.S. economic reports while awaiting a speech from Fed Chair Janet

Yellen Chart

The financial markets traded mixed on Wednesday as investors digested a number of U.S. economic reports while awaiting a speech from Fed Chair Janet Yellen on monetary policy later today and Trump’s inauguration on Friday.

In economic news, the U.S. Consumer Price Index (CPI) came in at 0.3 percent as expected. Annualized, the CPI now stands at 2.1 percent. This is slightly higher than the Fed’s 2.0% target and the first time it has been over the target since the summer of 2014.

Industrial Production rose 0.8 percent in December also in line with expectations but well above the previous -0.7% read. The Capacity Utilization Rate was 75.5%, slightly above the previous 74.9% and slightly below the 75.6% estimate.

The NAHB Housing Market Index showed a slight drop in homebuilder sentiment, coming in at 67 versus a 69 forecast and previous read.

Also on Wednesday, Minneapolis Fed President Neel Kashkari said the Federal Reserve is launching a research institute to generate ideas elected officials might use to help Americans benefit from a growing economy. Kashkari did not refer to the U.S. economic outlook in his remarks. However, he did say, “If we can do research to understand the root causes of the problems and identify potential fiscal policy solutions or other approaches, I believe it is appropriate for the Federal Reserve to do that research.”

Later today at 1800 GMT the Fed will release its latest Beige Book. At 2000 GMT, Fed Chair Janet Yellen is scheduled to give a speech on monetary policy at the Commonwealth Club in San Francisco. Traders will be listening to her remarks for clues as to the timing of the next Fed rate hike.

U.S. Treasurys

U.S. Treasury debt instruments trended lower on Wednesday as yields rose after the release of the CPI data and ahead of remarks from Yellen. The yield on the benchmark 10-year Treasury Note rose to 2.369 percent and the 30-year Treasury Bond was also higher at 2.979 percent.

U.S. Equities

U.S. stocks mostly flat-lined as investors interpreted the latest data on corporate earnings and the inflation data. Investors also seemed reluctant to take positions ahead of Yellen’s speech and Trump’s inauguration on Friday. Although bank earnings continued to beat the street estimates, investors continued to use the opportunity to book profits rather than add to current positions. This is likely due to uncertainty over whether Trump will be able to relax banking regulations as promised during his campaign in a timely manner.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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