Wall St. set to open flat ahead of Yellen's testimony

November 17, 2016 09:08 AM

U.S. stocks were set to open little changed on Thursday, a day after the Dow broke a seven-day rally, as investors await a testimony by Federal Reserve Chair Janet Yellen.

The Fed could raise interest rates "relatively soon" if economic data keeps pointing to an improving labor market and rising inflation, Yellen said in prepared remarks on Thursday in a clear hint the central bank could hike rates next month.

Yellen is scheduled to begin her testimony on the economic outlook before the congressional Joint Economic Committee at 10 a.m. ET.

U.S. stocks had been on a tear since Donald Trump's surprise victory in the Nov. 8 U.S. presidential election, with the Dow closing at a record level four days in a row.

The rally lost steam this week with investors seeking clarity on Trump's campaign promises and bracing for higher interest rates.

Trump's proposals to cut taxes and raise infrastructure spending are expected to boost economic activity and inflation, raising the possibility of more interest rate hikes. That sent the dollar index to a near 14-year high.

"The market is still adjusting to the reality of the elections and what that might mean," said Eddie Perkin, chief equity investment officer at Eaton Vance.

"I think the market has gotten a little bit ahead of itself - there is an expectation that inflation is coming, that rate hikes are coming, but I'm not completely convinced of that."

Perkin said the $1 trillion infrastructure spending proposed by Trump may be toned down by Congress and will be spread out over several years.

S&P 500 e-minis were down 0.25 points, or 0.01 %, with 122,664 contracts traded at 8:33 a.m. ET.

Nasdaq 100 e-minis were up 1.75 points, or 0.04 %, on volume of 26,822 contracts.

Dow e-minis were down 10 points, or 0.05 %, with 23,784 contracts changing hands.

A rate hike at the Fed's meeting next month is a foregone conclusion, according to several analysts. Traders are pricing in an 81 % chance of a December move, according to Thomson Reuters data.

"Markets are more interested in Yellen's view on the economic effects of Trump's proposed fiscal policies," said Hussein Sayed, chief market strategist at FXTM.

U.S. consumer prices recorded their biggest increase in six months in October. The Consumer Price Index increased 0.4 % last month after rising 0.3 % in September.

Other data showed U.S. housing starts surged to a more than nine-year high in October and the number of Americans filing for unemployment benefits fell to a 43-year low last week.

Cisco fell 5.1 % to $29.99 in premarket trading after its current-quarter forecast fell below analysts' estimates.

Wal-Mart Stores fell 2.9 % to $69.29 after the world's largest retailer reported lower-than-expected quarterly comparable sales.

About the Author

Tanya Agrawal, Reuters