Janet Yellen stirred up the markets when she said rising interest rates moderately may be necessary to keep the U.S. economy from overheating. This remark sparked the worst day for the Nasdaq 100 since March.
Stocks dropped with the Dow Jones Industrial Average posting a small gain before closing while the yield for the 10-year U.S. Treasury note ended lower for the third consecutive session. The yields on shorter-term Treasurys were not significantly affected indicating that the former Fed chair’s comment did not have a great impact on investors’ expectations for interest rates.
Janet Yellen further commented on Tuesday afternoon, after the U.S. markets had closed, that she wasn’t forecasting increases in interest rates to hold back any inflation caused by President Joe Biden’s stimulus plans.
The dollar posted gains on Wednesday morning in Asia after Yellen’s further comments helped calm the markets and ease inflation concerns among investors.
The U.S. Markets
Jerome Powell, Fed Chair, also said last week that the labor market has not fully recovered yet. The U.S. trade deficit widening to a record $74.4 billion in March poses an extra challenge. Investors are expecting the ADP National Employment Report and the Institute of supply Management (ISM) Non-Manufacturing Purchasing Managers Index (PMI) scheduled to be released later today, and the April employment report, including non-farm payrolls (NFP) slated to be released on Friday.