Yellen spoke and stocks rallied - here's what to expect next


"Equity markets jumped sharply yesterday with the Dow hitting a new record high, while the U.S. dollar slumped after Fed chief Janet Yellen caught investors by surprise by leaning back from the prospect of multiple rate hikes in the coming months".

Federal Reserve Chair Janet Yellen says she "absolutely" intends to serve out her four-year term as head of the central bank but she hasn't given thought to whether she would accept a second term if President Donald Trump asked her to do so.

Yellen repeated the message she has been sending all year that the US economy no longer needs the extraordinary support the central bank began providing in 2008 in the wake of a severe financial crisis and the deepest recession since the 1930s.

Per Janet Yellen's comment, the "neutral policy stance" is another way of saying that the Fed funds rate is appropriate or near appropriate given current and expected future economic conditions.

Sometimes the appearance of a Fed chair in front of Congress gets people nervous, but that wasn't the case with Yellen's testimony Wednesday, perhaps because it was so well telegraphed. Central banks around the world have been hinting that the accommodative policies in place for years may no longer be needed amid signs that the global economy is gaining traction.

The Dow rose 123.07 points or 0.6 percent to 21,532.14, the Nasdaq surged up 67.87 points or 1.1 percent to 6,261.17, and the S&P 500 advanced 17.72 points or 0.7 percent to 2,443.25. With its latest rally, the Aussie has now risen 7.3 per cent against the USA dollar this year. The news boosted other retailers, with Wal-Mart up 1.4 percent and Costco edging up 0.9 percent.

Gold prices have are down $2 or 0.2% overnight trading at $1,218 an ounce.WTI Crude Oil prices are up 0.7% trading at $46.02 a barrel.

US yields fall to multi-week lows.

The market is now pricing in less than a 50% probability of rate hike at the December meeting.

Starting Wednesday, traders will be listening for clues as to how aggressively the Fed will continue to raise rates and start to unwind its big bond-buying program.

The major European markets are also seeing some strength on the day. Earlier in Asia, Japan's Nikkei 225 index gained 0.6 percent on expectations the yen will weaken further against the dollar as the central bank strives to keep long-term bond yields low.

The Straits Times Index fell 0.32 percent or 10 points to 3,208.

At the front-end of the curve, the two-year yield was at 1.367 percent, up from Wednesday's 1.351 percent.

ENERGY: Benchmark U.S. crude fell 31 cents to $45.18 per barrel in electronic trading on the New York Mercantile Exchange. Bonds rallied along with stocks to push 10-year yields down to around 2.31% by the end of the day as the futures market predicted less chance of a near-term rate hike (see below). Brent crude, used to price worldwide oils, fell 30 cents to $47.44 per barrel.