Stocks slip on Fed official's rate hike call; sterling up

Thu Jun 26, 2014 6:09pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - U.S. stocks ended slight lower on Thursday after a Federal Reserve official said interest rates should rise by early 2015, while the pound gained on talk that UK rates also will go up, even as the Bank of England took only mild steps to tighten lending.

The dollar erased gains to trade flat against a basket of major currencies as foreign exchange traders discounted the remarks by the president of the St. Louis Fed, James Bullard. Bullard, in televised comments, said that raising rates by the end of the first quarter in 2015 would be appropriate, based on his forecast that U.S. growth will register 3 percent for the next four quarters.

On Wall Street, six of the 10 S&P 500 sectors finished lower.

"The market is a little bit extended, and we're at the point where there's a little bit of rebalancing going on," said Fred Dickson, chief market strategist at D.A. Davidson & Co, in Lake Oswego, Oregon.

Bullard, a non-voting member of the Fed's policy-setting committee, said in an interview with Fox Business Network that the U.S. jobless rate will fall below 6 percent later this year. Inflation looked likely to rise back to 2 percent, putting the economy closer to normal than most realize, he said.

"I think Bullard caught most people off guard as the Fed meeting was just last week and there was no explicit reading anyone took from there of a Q1 rate hike," said Adam Sarhan, chief executive at New York's Sarhan Capital.

"It's very possible that he's on his own or he might have one other Fed official or a minority within the Fed who thinks we should raise rates sooner rather than later," Sarhan said.

The Dow Jones industrial average .DJI fell 21.38 points or 0.13 percent, to end at 16,846.13. The S&P 500 .SPX slipped 2.31 points, or 0.12 percent, to 1,957.22. The Nasdaq Composite .IXIC dipped 0.71 point, or 0.02 percent, to 4,379.05.   Continued...

The curve of the German share price index DAX board, is pictured at the Frankfurt stock exchange June 24, 2014.    REUTERS/Remote/Stringer