The trading day of December 3rd did not bring good news for US Stocks. The highlight of the day was the testimony of Janet Yellen, once again hinting that a rate hike is more than likely to happen in mid-December. This interest rate hike equals bad news for US stocks and its potential effects have been seen across the map.
In her detailed testimony, Yellen practically reiterated the comments she made on December 2nd, which all led to an interest rate hike in the meeting that will take place on 15-16 December. She stated that she is looking forward to a good, clear trend in job creations following the example set by November’s report, but the number cannot receive more weight that it deserves. The economic consensus is that the nonfarm payrolls will increase by 200,000 with the unemployment rate sitting steady at 5%.
Combine all this with the fact that the ECB further dropped its main interest rate into negative territory today and we’ve got a great scenario for dollar bulls. Giving up the tiny gains they had at market open, the S&P 500 lost around 1,5% today, the Dow Jones Industrial Average fell 1,4% and the Nasdaq Composite another 1,75%.
There are other things to consider, though. Shares of Avago Technologies surged 8, 6% today following a stronger-than-expected profit reports published by the company. Oil is also on the rebound, recapturing the 40$ a barrel mark and pushing higher still as investors are still seeking bargains. Yahoo was one of the losers of the day due the increased rumors about them selling their internet business, with a loss of 4%.
All in all, it seems that the great difference between interest rate policy will be the main factor driving trading for the next period. It is clear that the meeting in mid-December will be of crucial importance, both for US Stocks as well as for the world’s economy.