Stocks hit all-time highs on Tuesday after Federal Reserve chair Janet Yellen spoke to lawmakers on Capitol Hill, though Yellen’s comments didn’t do much to change the market’s outlook on rate hikes.
First, the scoreboard:
- Dow: 18,212.4, +95.5, (+0.5%)
- S&P 500: 2,115.6, +5.9, (+0.3%)
- Nasdaq: 4,967.5, +6.5, (+0.1%)
And now, the top stories on Tuesday:
1. Fed chair Janet Yellen was on Capitol Hill on Tuesday talking before the Senate Banking Committee. Yellen delivered prepared remarks and fielded questions from lawmakers for almost three hours, though Yellen’s comments did little to change the outlook for the Fed’s policy plans.
2. Following Yellen’s commentary, Deutsche Bank economist Joe LaVorgna said that following line out of Yellen’s prepared remarks was the most important of the day: “It is important to emphasise that a modification of the forward guidance should not be read as indicating that the Committee will necessarily increase the target range in a couple of meetings. Instead the modification should be understood as reflecting the Committee’s judgment that conditions have improved to the point where it will soon be the case that a change in the target range could be warranted at any meeting.”
3. Along with Yellen’s comments and Q&A, the Fed also released a detailed report on the current state of financial markets and monetary policy, and again made reference to what it called “stretched” valuations relative to historical norms. The Fed, which in July called out lofty elevations in the biotech and social media sectors, was more broad this time around, saying, “Overall equity valuations by some conventional measures are somewhat higher than their historical average levels, and valuation metrics in some sectors continue to appear stretched relative to historical norms.”
4. JPMorgan held an investor day on Tuesday, and as Business Insider’s Linette Lopez reports, the big takeaway is that one of the big drags on JPMorgan’s returns that the bank can control is legal costs, and the bank has acknowledged that it can’t afford to screw up anymore.
5. The market is focused on when the Federal Reserve will raise interest rates for the first time in 8 years. But for a long term look, here’s a chart of interest rates since 3000 BC.
6. A number of Wall Street firms initiated research coverage on shares of Shake Shack on Tuesday. Among the notable firms initiating coverage was Goldman Sachs, which put a Neutral rating on shares of the burger chain and thinks that while Shake Shack is a great company, the stock is a bit too pricey. Shake Shack shares gained about 5% on Tuesday.
7. A big takeaway from Goldman’s report on Shake Shack is that the company’s marketing strategy is untraditional, appealing to its core market: millennials. The company’s following on Vine, for example, is top in the industry.
8. On the economic data front, the latest Case-Shiller home price index showed that prices rose 0.87% in December when compared to the prior month, topping expectations. Over last year, prices rose 4.46%, better than the 4.3% that was expected. In a statement, however, David Blitzer at S&P Dow Jones Indices said: “The housing recovery is faltering. While prices and sales of existing homes are close to normal, construction and new home sales remain weak.”
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