Wall Street rallies as traders reassess Fed outlook; dollar slips

Mon Sep 12, 2016 4:59pm EDT
 
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By Rodrigo Campos

NEW YORK (Reuters) - U.S. stocks led global shares higher on Monday after Federal Reserve policymakers sounded cautious notes on near-term interest rate increases, while the U.S. currency slipped.

Comments from Fed officials in the past few weeks had raised speculation of a U.S. rate increase this year and the European Central Bank and Bank of Japan recently refrained from further monetary policy easing, fuelling Friday's broad stocks selloff and rise in bond yields.

But U.S. stocks began to recover on Monday morning after Atlanta Federal Reserve Bank president Dennis Lockhart said economic conditions warrant a "serious discussion" of whether to raise rates at next week's Fed meeting, adding that there was no urgency to act.

"Lockhart helped assuage fears that a rate hike in September was imminent," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

Stocks hit session highs after Fed Governor Lael Brainard, who some had expected to abandon her stance and open the door to higher rates, said the U.S. central bank must be careful not to remove stimulus too quickly.

Brainard used the plural "months" to indicate how much more economic data she wants to monitor, a key suggestion according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

"This doesn’t mean November isn’t in play, but you’d be hard-pressed to still believe a September hike is in the offing," he said.

The probability markets assigned to a Fed rate hike at next week's meeting fell to 15 percent from 24 percent on Friday according to CME Group's FedWatch tool.   Continued...

 
Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., August 30, 2016.  REUTERS/Lucas Jackson/File Photo