Wall Street falls, dollar up on March Fed rate hike bets

Thu Mar 2, 2017 4:45pm EST
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By Sinead Carew

NEW YORK (Reuters) - Wall Street pulled back from Wednesday's records, led by financials, while the dollar traded at a seven-week high on positive U.S. data and growing expectations the Federal Reserve will soon raise interest rates.

Treasury yields also rose after Fed Governor Lael Brainard said late Wednesday that an improving global economy and a solid U.S. recovery meant it would be "appropriate soon" to raise rates - the latest of several Fed officials making hawkish statements this week.

Fed Chair Janet Yellen is set to speak on the economic outlook in Chicago on Friday in her last speech before the Fed's March 14-15 meeting.

Federal funds futures prices suggest markets now see a 77.5 percent chance of a 25-basis-point rate hike in March, up from 66 percent on Wednesday and 35 percent on Tuesday, according to CME Group's FedWatch tool.

The prospect of higher rates pushed equities down on Thursday, compounding the pressure after Wednesday's rally, in which all three major indexes hit records.

"It was an awfully strong rally yesterday without necessarily a lot of real news to justify it, so I think you're just getting some profit taking today," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

The stock market is "overdue for a correction" because valuations are so high, said Robert Phipps, a director at Per Stirling Capital Management in Austin.

The Dow Jones Industrial Average .DJI fell 112.58 points, or 0.53 percent, to 21,002.97, the S&P 500 .SPX lost 14.04 points, or 0.59 percent, to 2,381.92 and the Nasdaq Composite .IXIC dropped 42.81 points, or 0.73 percent, to 5,861.22.   Continued...

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, February 28, 2017. REUTERS/Staff/Remote