Global markets subdued ahead of Yellen speech, healthcare stocks dip

Thu Aug 25, 2016 4:56pm EDT
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By Hilary Russ

NEW YORK (Reuters) - Most investors refrained from making big bets on Thursday ahead of the start of a central bankers' meeting in the mountains of Wyoming that could clarify the path of U.S. interest rate policy.

Federal Reserve Chair Janet Yellen will deliver the keynote speech on Friday, but she may struggle to convince financial markets she can steer a divided U.S. central bank to raise interest rates at least once in 2016 after it started the year with four hikes on its radar.

Policymakers expect three rate increases in 2017, in addition to two hikes this year. Financial markets, however, show investors see only one rate increase from now through the end of 2017.

"We still have got this disconnect between markets and the Fed," St. Louis Federal Reserve President James Bullard told reporters last week.

The waiting game left many markets sluggish all week. The U.S. dollar, sensitive to any signal on whether rates will rise this year, inched lower on Thursday to $94.765 against a basket of major currencies .DXY.

"Clearly, the Fed is in the driver's seat. They have the stage to command investor attention in Jackson Hole," said Peter Kenny, senior market strategist at Global Markets Advisory Group, in New York.

"The division among the voting members of the FOMC is very, very clear and there is nothing we have seen in recent data that would tilt the argument to the one side of raising or the other side of remaining unchanged in September."

U.S. stocks and Treasury prices tipped to the negative, following Asia and Europe downward. A drop in healthcare and consumer names pulled Wall Street modestly lower, while financials advanced slightly after two more Fed officials pushed the case for a rate hike.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., August 25, 2016. REUTERS/Brendan McDermid