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The stock markets in the United States declined toward the end of the week due to the statement of Federal Reserve Chairperson Janet Yellen that she expects interest rates to increase this year. She also indicated that the frequency of further increases will be gradual.

Yellen said, “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate.” She also noted that the labor market is close to achieving a full strength, but she emphasized, “we are not there yet.”

Commenting on Yellen’s statement, Joe Bell, a senior equity analyst at Shaeffer’s Investment Research told Bloomberg, “The comment that a hike would be gradual might’ve eased some fears that maybe rates were going to increase quickly once they began.” He added, “We’ve pushed up against some resistance.” According to him, they are consolidating, and the market reaction will be moderate even with positive news.

Today, the Bureau of Labor Statistics of the Department of Labor reported that the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1% in April. The index for all items, less food and energy rose 0.3%, the biggest gain since January 2013. The data showed that the inflation is moving toward the goal of the Federal Reserve.

Michael Hanson, a senior economist at Bank of America commented, the data allowed policy makers to say that the” inflation is doing better” and they “seem awfully confident that labor markets are going to tighten, and inflation is going to pick-up.”

U.S. Markets

  • Dow Jones Industrial Average (DJIA) – 18,232.02 (-0.29%)
  • S&P 500- 2,126.06 (-0.22%)
  • NASDAQ- 5,089.36 (+0.38%)
  • Russell 2000- 1,252.24 (-0.36%)

European Markets

  • EURO STOXX 50 Price EUR- 3,679.14 (-0.26%)
  • FTSE 100 (INDEXFTSE:UKX) Index- 7,031.72 (+0.26%)
  • Deutsche Borse AG German Stock Index DAX- 11,815.01 (-0.42%)
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