- Stocks rising ahead of Brexit, Yellen. U.S. equities are moving up in early trading; they ticked slightly higher in yesterday’s session, but moved off their highs as Federal Reserve Bank (Fed) Chair Janet Yellen expressed concern about the global economic outlook. Six of the 10 sectors closed up on Tuesday, with energy leading the way as the price of WTI crude oil moved back above $50 per barrel. The 10-year Treasury yield remains flat at 1.71%, while the dollar is giving up some of yesterday’s gains. Overnight, Asian markets closed mixed with the Shanghai Composite gaining 0.9%, while Japan’s Nikkei lost 0.6%. Finally, in afternoon trading European stocks are higher across the board, as the latest survey shows that “remain” voters in the U.K. have widened their lead to 54.0%.
- Yellen, Fed sound note of caution on raising rates ahead of Brexit. In the first leg of her semiannual Monetary Policy testimony to Congress yesterday, Fed Chair Janet Yellen didn’t vary much from the game plan unveiled by the Federal Open Market Committee (FOMC) at last week’s meeting. Yellen used the word “cautious” three times during her testimony, and continued to say that future rate hikes would be gradual and dependent on the labor market, inflation, and the economy hitting the Fed’s targets. As was the case with the FOMC meeting last week, Yellen gave no hint of a rate hike in July, but didn’t rule it out either. Yellen will deliver the second leg of her testimony to the House today. Formerly known as the Humphrey Hawkins testimony, it was held in June this year instead of July, due to the earlier than usual political conventions this summer and the late July FOMC meeting.
- S&P 500 and crude oil bounce off 50-day moving averages. After gapping higher and closing well off the highs on Monday, the S&P 500 gained 0.3% yesterday. Technically, the index found support near its upward-trending 50-day moving average; but it is still just beneath the 2,100 level, which is an area that has been trouble for the S&P 500 this year. Energy was the top sector yesterday, as crude oil moved back above $50 per barrel. Speaking of 50-day moving averages, crude oil bottomed at that trend line last week and has moved nicely higher since.
- Existing Home Sales (May)
- Yellen (Dove)
- Japan: Nikkei Mfg. PMI (Jun)
- Initial Claims (6/18)
- Markit Mfg. PMI (Jun)
- Eurozone: Markit Mfg. PMI (Jun)
- “Brexit” Referendum in UK (First Results Around 7 P.M. ET; Final Results at 2 A.M. ET Friday 6/24)
- Durable Goods Orders and Shipments (May)
- Germany: Ifo (Jun)
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Treasury inflation-protected securities (TIPS) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI)—while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of is that the CPI might not accurately match the general inflation rate; so the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.
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