Janet Yellen is warning that social media companies’ share prices, and those of other high-flying stocks, are dangerously high.

In her just-released full report to Congress on the state of monetary policy, the Fed Chair says,
“…Valuation metrics in some sectors do appear substantially stretched — particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.”

She actually mentions this twice, explaining that “signs of risk-taking have increased in some asset classes” like social media and biotech firms, “with ratios of prices to forward earnings remaining high relative to historical norms.”

Shares in Facebook are now down 1.3%, and off 0.6% in Twitter.

Yellen is appearing before House members Tuesday morning.

But she says the broader stock market is not overvalued. “Some broad equity price indexes have increased to all-time highs in nominal terms since the end of 2013. However, valuation measures for the overall market in early July were generally at levels not far above their historical averages, suggesting that, in aggregate, investors are not excessively optimistic regarding equities.”

Investors don’t appear to be buying it: The entire market turned red after the report and full congressional testimony were released, with the S&P500 off 0.23%, and the Dow down 0.05%.

She goes on to express concern about the increasing number of bets on junk debt but says there is no reason to believe the financial system couldn’t handle a sudden rush out of the sector.

“Signs of excesses that could lead to higher future defaults and losses have emerged in some sectors, including for speculative-grade corporate bonds and leveraged loans,” she says in the report.

“At the same time, financial firms’ use of short-term wholesale funding has not increased materially and the capital and liquidity position of the banking sector continued to improve.”

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