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The Dow Jones Industrial Average today fell as investors weighed comments by U.S. Federal Reserve officials during the central bank's annual policy summit in Jackson Hole, Wyo. Once again, traders are spooked that the Fed may increase interest rates in the coming months. Fed Chair Janet Yellen argued the case for a rate hike, citing improvements in the U.S. labor market and increased expectations for U.S. economic growth.
The CBOE Volatility Index (VIX) – also known as Wall Street's fear gauge – rallied more than 9% to a seven-week high of 14.15.
Let's look at the final numbers on Wednesday for the Dow, S&P 500, and Nasdaq:
Dow Jones: 18,395.40; -53.01; -0.29%
S&P 500: 2,169.04; -3.43; -0.16%
Nasdaq: 5,218.92; +6.71; +0.13%
Here's a look at today's most important market events and stocks, plus a preview of Monday's economic calendar.
DJIA Today: Dow Slides After Janet Yellen and Stanley Fischer Talk Rates
The Dow slipped another 53 points after traders weighed statements by Federal Reserve Chair Janet Yellen and Vice Chair Stanley Fischer. During the central bank's annual Jackson Hole symposium, Fischer argued the case for a rate hike has been emboldened in recent months. Meanwhile, Yellen said the "U.S. economy is close to the Fed's goals for employment and price stability." The markets continue to price in an increasing chance of a rate hike. According to CME FedWatch, the probability of a rate hike in September increased to 30%.
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The Federal Reserve has been teasing a rate hike since it finally took action last December. Money Morning Chief Investment Strategist Keith Fitz-Gerald argues two important things about the Fed. First, there are stocks you can buy that will outperform and aren't subject to the whims of the central bank. Second, the Federal Reserve has no idea what it is doing, and it is just crazy enough to raise interest rates now so it can lower them when all of its economic misfortunes come home to roost.
Oil prices were flat today despite reports of a missile attack in Saudi Arabia. Last night, Yemeni missiles struck oil facilities in southern parts of Saudi Arabia. The West Texas Intermediate (WTI) crude oil price today gained 0.1%, while the Brent crude oil price added 0.2%.
Oil prices have been falling on rising supply concerns and waning expectations about the size of any production freeze by OPEC. The global oil cartel is set to meet in September to discuss a possible cut to global output. However, Money Morning Global Energy Strategist Dr. Kent Moors has said that investors shouldn't anticipate a deal next month. Kent argues that a deal is coming, but it won't be the type that traders are hoping for in September.
But the big story today was U.S. economic growth – or the lack thereof despite all the reassurances from the Federal Reserve. According to the U.S. Commerce Department, the U.S. economy grew by a paltry 1.2% in the second quarter as businesses drew down on inventories. The report indicates higher growth in imports than economists had anticipated, in addition to weak government spending.
Now, let's look at the stocks you need to know about today…
Top Stock Market News Today, Aug. 26, 2016
- Shares of Herbalife Ltd. (NYSE: HLF) dipped nearly 5% on news that hedge fund manager Carl Icahn, the company's top shareholder, is looking to sell his firm's stake. Icahn owns roughly $1 billion in Herbalife shares. Hedge fund manager Bill Ackman – who has been shorting Herbalife stock and accusing it of running a Ponzi scheme – said that Icahn got out of the stock because he knew that the company is doomed.
- Shares of Tesla Motors Inc. (Nasdaq: TSLA) slipped slightly despite news that antitrust regulators approved the company's takeover bid for SolarCity Corp. (Nasdaq: SCTY).
- On the earnings front, shares of GameStop Corp. (NYSE: GME) fell more than 10% after the video-game retailer announced a brutal earnings report. The company fell well short of Wall Street earnings expectations after reporting a sharp slump in hardware and software sales.
Monday's U.S. Economic Calendar (all times EDT)
- Personal Income and Outlays at 8:30 a.m.
- Dallas Fed Manufacturing Survey at 10:30 a.m.
- 4-Week Bill Announcement at 11 a.m.
- 3-Month Bill Auction at 11:30 a.m.
- 6-Month Bill Auction at 11:30 a.m.
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.