Stocks turned lower on Wednesday morning after Federal Reserve Chair Janet Yellen triggered fears an interest rate hike could come by year's end.
The S&P 500 was down 0.17%, the Dow Jones Industrial Average fell 0.08%, and the Nasdaq slid 0.17%.
In her semi-annual testimony to the House of Representatives, Yellen noted that accommodative policy would need to be removed if the economy continues to improve as expected, citing a robust labor market and a steady unemployment rate. As usual, Yellen said there was no fixed timetable for a hike, though comments from the Fed last week suggest a December increase is a very real possibility.
Earlier, Yellen told the House Financial Services Committee that the top U.S. banks have "strengthened considerably" since the apex of the financial crisis. Yellen outlined plans for the Fed to work to ensure larger capital requirements for big banks to weather crises when they arise. The eight largest banks in the U.S. have doubled common equity capital to $800 billion since 2008, Yellen noted.
"We must carefully monitor the impact of the regulatory changes we have made and remain vigilant regarding the potential emergence of new risks to financial stability," said Yellen.
Yellen was just one of the Fed speakers to crowd the economic calendar on Wednesday. A busy day of Fed talk could illuminate the central bank's near-term plans for interest rates.
St. Louis Fed President James Bullard and Chicago Fed President Charles Evans will deliver remarks at the Community Banking in the 21st Century conference on Wednesday, Cleveland Fed President Loretta Mester will give a speech on the economic outlook, and Kansas City Fed President Esther George will make remarks at the Forum for Minority Bankers. Mester and George both recently voted for a rate hike, two of three dissenters at the September Federal Open Market Committee meeting.
"We expect hawkish tones from both of the dissenters, which are likely to keep the market focused on a fourth-quarter rate hike," BNP Paribas analysts wrote in a note. "It is likely that both Ms. Mester and Ms. George will highlight the economy's progress and discuss the risks of postponing a near-term gradual tightening of interest rates."
Technical analyst Helene Meisler of Real Money, our sister site for active traders, writes that the S&P 500's rally yesterday came on "awful" breadth, adding that "there is no way to spin that bullishly." Click here to check out her latest technical take.
Crude oil prices rebounded Wednesday as the International Energy Forum remained in focus. Major oil producers have been discussing the current oil crisis in Algeria for the past three days and many had hoped Organization of Petroleum Exporting Countries might agree to a production freeze. The likelihood of an agreement fell on Tuesday, leading to a 3% decline in oil prices.
Crude held higher after the latest read on oil inventories in the U.S. showed a decline for the fourth week in a row. The U.S. Energy Administration reported that domestic crude stocks fell by 1.9 million barrels in the past week. A separate read from the American Petroleum Institute a day earlier had shown a much smaller drop. Consensus was for a build of three million barrels.
West Texas Intermediate crude oil was up 0.25% at $44.78 a barrel on Wednesday morning. (Bob Byrne of Real Money runs down the latest charts for oil, natural gas, gold and the S&P 500 here.)
Durable goods orders came in flat in August, according to the U.S. Census Bureau, far better than an expected decline of 1.9%. Excluding transportation, U.S. orders fell 0.4%. Orders for long-lasting goods were revised lower in July, showing growth of 3.6% from 4.4%. August's flat reading pointed to continued weakness in the manufacturing space as a strong U.S. dollar and soft global demand still impede activity.
German officials have quickly denied a report that the government would help Deutsche Bank (DB) - Get Report in the case it cannot bankroll its recent litigation issues. Earlier reports indicated the bank would be allowed to sell its assets to other lenders at prices that would fund some of the charges and that the German government might even take a 25% stake in the company.
Earlier this month, the U.S. Justice Department levied a $14 billion fine at Deutsche Bank following an investigation into its residential mortgage-backed securities.
Separately, Deutsche Bank agreed to sell its Abbey Life insurance businesses in the U.K. to Phoenix Group for £935 million ($1.2 billion).
BlackBerry (BBRY) jumped 5% following a better-than-expected quarter. Adjusted earnings were breakeven, better than an expected loss of 5 cents a share. The tech company expects full-year earnings of breakeven to a loss of 5 cents a share, far narrower than consensus of a loss of 16 cents a share. CEO John Chen said the company is "reaching an inflection point with our strategy."
Alphabet (GOOGL) - Get Report slipped after Wedbush downgraded its rating on the shares to underperform from neutral. Analysts said recent changes to mobile search have seen ad growth decelerate sharply.
Nike (NKE) - Get Report slid 2% after quarterly future orders fell short of analysts' estimates. The measure, an indicator of sales scheduled through to January, rose 5% and slowed from 8% growth in the previous quarter. Overall revenue rose 7.7% over Nike's August-ended quarter.
Wells Fargo (WFC) - Get Report cancelled a total of $60 million in stock awards to CEO John Stumpf and retiring consumer banking chief Carrie Tolstedt. The bank also said it would conduct an independent review into sales practices. Wells Fargo has been under scrutiny since the scandal broke that workers had created up to two million unauthorized customer accounts to meet sales targets. The bank has since agreed to a $185 million settlement with government officials over a sales fraud investigation.
Macy's (M) - Get Report was downgraded to neutral with a $40 price target at Credit Suisse. The firm said management needs to prove to investors that it can execute in a challenging retail environment. Credit Suisse upgraded Dillard's (DDS) - Get Report to outperform with a $70 price target, noting that the company can continue to reduce debt and repurchase stock.