Yellen Says December Rate Hike Still Alive, Stocks Fall

Wall Street declined on the session after Janet Yellen said the possibility of a December rate hike was still on the table.

The Dow Jones Industrial Average was 48 points lower, or 0.27% to 17869. The S&P 500 shed 7 points, or 0.35% to 2102, while the Nasdaq Composite lost 2 points, or 0.05% to 5142.

The energy sector was the biggest decliner thanks to a bigger-than-expected build in crude stockpiles, while tech and utilities gained.

Today’s Markets

After a relatively calm week with no major announcements from the Federal Reserve or its members, Wall Street was sharply tuned in to what a raft of central bankers had to say on the U.S. economy on Wednesday.

During testimony in front of a House committee on Capitol Hill, Fed Chief Janet Yellen said it “could be appropriate” to hike interest rates at the FOMC’s December meeting. But she added “no decision” has been made and the Fed will review “all” economic data between now and then before it makes a final conclusion.

Yellen visited the Hill to speak about the central bank’s role in overseeing the U.S. financial system. She outlined reforms the central bank has taken – including capital controls and a liquidity coverage ratio – to bolster firms it regulates. The committee, in particular the chair of the House panel’s subcommittee on oversight and investigations, was widely expected to press Yellen during a question-and-answer period on the possible 2012 leak of confidential information. A subpoena last Friday resulted in the Fed handing over confidential documents to the committee.

Also likely up for conversation during Yellen’s testimony were proposals to decrease the $50 billion threshold for banks subject to greater regulation. Investors were also likely to listen for any comments on the chief’s economic outlook as the potential for a December interest-rate hike is still in play.

New York Fed President William Dudley, following a 2:20 speech in New York, said he agrees fully with Yellen regarding the possibility of a December rate hike. However he hedged a bit, saying he wants to “see what the data shows.” In prepared remarks, Dudley spoke about research findings from a panel of New York Fed economists on a range of topics including income, employment, housing, and access to credit.

Finally, at 7:30 p.m., Vice Chairman Stanley Fischer will discuss central-bank independence in Washington D.C. at the National Economists Club Herbert Stein Memorial Lecture. Fischer will also take questions from the audience at the conclusion of his speech.

In the meantime, on the economic-data calendar, the Commerce Department reported the U.S. trade gap narrowed to $40.81 billion in September from $48.02 billion in August. The expectation was for a $41.1 billion trade balance.

The U.S. private sector added 182,000 employees to payrolls in October, higher than the 182,000 economists anticipated, according to payroll processor ADP.

The Institute for Supply Management’s gauge of service-sector growth unexpectedly rose in October to 63 from 60 in September. The reading was the highest since July, and falling to the lowest level since June. Economists widely anticipated the gauge to fall to 59.5.

Peter Kenny, independent market strategist, said while there’s normally an order of importance to the economic data, this time around, everything matters, and Fed speak will dominate the focus.

“The odds of a move by the Federal Reserve only get more likely as global markets continue to stabilize as a result of global economic stability and expansion,” he wrote in a note. “The U.S. economic narrative may well be turning into one that speaks to unequivocal, sustainable growth again.”

In recent action, the yield on the benchmark 10-year U.S. Treasury bond declined 0.008 percentage point to 2.212%.

Investors will also keep a keen eye on the Dow Jones Industrial Average. The index is about 80 points away from the 18000 mark, a level it hasn’t seen since July 21.

Global oil prices were lower after a rally in the prior session thanks to supply worries in Brazil and Libya due to a strike and an oil-export terminal closure. Weekly crude inventories from the Energy Information Administration showed a 2.85 million barrel build to crude stockpiles last week, slightly more than the 2.8 million barrel forecast. U.S. crude prices declined 3.30% to $46.32, while Brent, the international benchmark, declined 3.88% to $48.58 a barrel.

The energy sector was among the biggest decliners on the session, falling 1.42% in recent action as heavyweights Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) were among the top five decliners on the Dow.

“The start of domestic oil exports should cause domestic prices to converge with global benchmarks, but is unlikely to lead to a new bull market…U.S. oil exports should remove the discount, but with rising production in the Middle East and Russia, global oil prices are unlikely to rise much either,” U.S. Bank Wealth Management’s Rob Haworth and Dan Heckman said in a note.

Metals were mixed: Gold slid 0.69% to $1,106 a troy ounce. Silver declined 1.19% to $15.06 an ounce, while copper shed 0.32% to $2.32 a pound.

On the earnings front, 21st Century Fox (NYSE:FOXA), the parent company of the FOX Business Network, reported a fall in quarterly revenue as a light number of studio releases weighed on the business. Time Warner (NYSE:TWX) reported a beat on both lines in 3Q.

Tesla (NASDAQ:TSLA) shares, despite a quarterly loss, continued to surge after the automaker said after the bell on Tuesday it could still hit its fourth-quarter sales targets.

Overseas, European markets were mixed. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, gained 0.18%, while the German Dax slid 0.68%. The French CAC 40 gained 0.45%, and the UK’s FTSE 100 jumped 0.81%.

Asia markets ended the session higher.