Stocks reversed lower in afternoon trading Friday after Fed chief Janet Yellen said the economy was strong enough to justify a rate hike and her No. 2 said that could mean a move in September.
Yellen said a strong labor market had strengthened the case for a rate increase. She said the Fed forecasts moderate growth in GDP and inflation rising to 2% over the next few years. Fed Vice Chairman Stanley Fischer said her remarks were consistent with a September rate increase. He saw the possibility of two rate hikes this year.
Stocks, which had extended modest gains on Yellen's comments, reversed lower. The major averages are off session lows, with the Nasdaq down 0.1%, the S&P 500 off 0.2% and the Dow Jones industrial average retreating 0.3%. Volume was tracking higher than the same time Thursday on both the NYSE and the Nasdaq exchanges in the stock market today.
Yellen's much-anticipated speech at Jackson Hole, Wyo., led Fed funds futures traders to up their bets for a rate increase, but only after the election. But they now see a 30% chance of a rate hike at the Sept. 21 meeting and a 36% chance at the Nov. 2 meeting -- both up modestly after Fischer's comments. But they see 58% change of a rate increase at the Dec. 14 meeting, according to the CME Group's FedWatch Tool. They still haven't priced in a second hike as likely at any point through next July.
Bank stocks turned mixed. Bank of America (BAC) rose 1.4% and Citigroup (C) 0.6%. JPMorgan Chase (JPM) briefly turned negative but are now up 0.2%.
Ulta Beauty (ULTA) disappointed investors even though it beat estimates on the top and bottom lines. Q3 guidance came up a little short. Shares slumped nearly 6%. The stock has undercut its 50-day moving average.
Nautilus (NLS) muscled higher for a 6% gain, emerging from a wide and loose consolidation on big volume. It will replace Outerwall (OUTR) in the small-cap S&P 600 index after the close Sept. 1. Outerwall is being bought out by Apollo Global Management.
