(Bloomberg) — U.S. stocks fluctuated while Treasuries fell as Federal Reserve Chair Janet Yellen told lawmakers the central bank must press on with stimulus. The pound gained, oil slid and corn dropped to near a four-year low.
The Standard & Poor’s 500 Index fell less than 0.1 percent at 10:31 a.m. in New York. The Russell 2000 Index of small companies sank 0.6 percent after a Fed report said valuations of some biotechnology and social media stocks may be “stretched.” JPMorgan Chase & Co. and Goldman Sachs Group Inc. rose at least 0.8 percent after the banks reported better-than-estimated earnings. U.S. crude fell below $100 a barrel for the first time since May. The yield on 10-year Treasury notes fell to near the lowest in six weeks. Corn fell 0.8 percent.
Yellen said in her semi-annual testimony to Congress that “significant slack” remains in labor markets and inflation is still below the Fed’s goal. Retail sales data today showed a broad-based increase in June, which probably helped the U.S. economy rebound in the second quarter. JPMorgan Chase said second-quarter profit beat estimates and Goldman Sachs reported a surprise increase in earnings.
“A tremendous amount of labor slack as well as a below-trend economy equates to a dovish Fed,” Chad Morganlander, a money manager at St. Louis-based Stifel, Nicolaus & Co., which oversees about $160 billion, said in a phone interview. “She’s already given out the playbook that her economic dashboard isn’t lighting up all green. The economy still has a ways to go.”
Yellen repeated her comments from last month that the Fed will keep interest rates low for a considerable time after ending its asset-purchase program, even as it saw improvements in the economy and labor market.
“A high degree of monetary policy accommodation remains appropriate,” Yellen said today in testimony prepared for delivery to the Senate Banking Committee. ‘‘Although the economy continues to improve, the recovery is not yet complete.’’
U.S. retail sales rose 0.2 percent in June after a 0.5 percent advance in May that was larger than previously reported, Commerce Department figures showed today in Washington. The New York Fed’s Empire manufacturing report unexpectedly rose to 25.6 for this month from 19.28 last month. The S&P 500 climbed 0.5 percent yesterday, the most since July 3, to rebound from its worst week since April. Profit at S&P 500 companies probably rose 4.5 percent in the three months through June while sales advanced 3.1 percent, analyst estimates compiled by Bloomberg show.
JPMorgan Chase climbed 3.9 percent and Goldman Sachs rose 0.8 percent to lead an index of banks to the biggest advance in the S&P 500. Both firms reported fixed-income revenue that topped estimates. Banks have seen profits hurt in recent quarters as the Fed slows its bond buying and fixed-income clients make fewer bets amid low volatility.
Wells Fargo & Co., the most valuable U.S. bank, posted second-quarter profit last week that rose 3.8 percent on lower credit costs, while Citigroup Inc. said yesterday that net income fell 96 percent as the company agreed to pay $7 billion to resolve a mortgage-related probe. Bank of America Corp., the second-biggest U.S. lender by assets, is scheduled to report results tomorrow.
Lorillard Inc. dropped 7.3 percent after Reynolds American Inc. reached an agreement to buy its rival for $27.4 billion including debt. Reynolds lost 3.4 percent.
The Stoxx Europe 600 Index was little changed after yesterday rallying the most in a week. Software AG declined 17 percent after the German company lowered its operating-margin forecast, dragging technology companies down for the second- biggest decline among 19 industry groups. Draegerwerk AG slumped 18 percent after the German maker of medical equipment cut its projection for sales growth.