US open: Stocks fall after Yellen speech, while dollar strengthens

US stocks opened lower and the dollar rallied on Tuesday as Federal Reserve chair Janet Yellen told Congress that interest rate hikes could rise gradually in 2017.

The Dow Jones Industrial Average was down 0.08% to 20,395.61, the S&P 500 fell 0.21% to 2,323.26 and the Nasdaq was 0.21% weaker to 5,752 at 1548 GMT.

Meanwhile, oil prices were firmer, with West Texas Intermediate up 1.04% to $53.49 a barrel and Brent crude up 1.22% to $56.28.

Yellen, who was testifying to the Senate Banking Committee and will also appear before the House Financial Services panel Wednesday, put a potential March hike back on the table and raised expectations of a possible three hikes over the course of the year.

She said that the Federal Open Markets Committee expects the US economy “to continue to expand at a moderate pace, with the job market strengthening somewhat further and inflation gradually rising to 2%”.

She said that changes in US fiscal and other policies, the future path of productivity growth, and developments abroad were sources of uncertainty, and said that more interest rate hikes may be appropriate in upcoming meetings if employment and inflation continues to evolve in line with the Fed’s expectations.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: “No surprises in Yellen's testimony, though we expected her to be a bit more blunt on the question of fiscal easing, which she has previously said the economy doesn't need right now. Instead, she merely said that she hoped any easing would be ‘aimed at improving productivity’, but ‘it is not my intention to opine on specific tax or spending proposals’."

On comments that Fed will evaluate the incoming data and potential fiscal policy changes "at upcoming meetings", Shepherdson said this means all meetings were 'live'.

"We note that Yellen argued that ‘wage growth has picked up’, with no reference to the weak-looking January reading, which we think is a one-time fluke. This suggests that the Fed is reasonably confident that the trend is rising,” he added.

Earlier, Richmond Fed president Jeffrey Lacker called for “significantly” higher interest rates. The central bank’s current rate target lies between 0.5% and 0.75% after raising rates twice last year and said there would three further hikes in 2017.

In currency markets, the dollar was up 0.58% against the pound to 0.8029, rose 0.26% versus the euro to 0.9462 and gained 0.54% against the yen to 114.35.

On the corporate front, Molson Coors Brewing was up 1.76% despite posting a fall in revenue and that profit missed expectations.

T-Mobile US rose 1.61% as it beat quarterly revenue and profit forecasts.

Dr Pepper Snapple fell 1.43% after a fall in quarterly profit, hampered by the fluctuating Mexican peso against the yen.

Communications and video-chip maker GigPeak surged 12.73% after IDT Inc said late on Monday that it will buy the group in an all-cash $250m deal.

US-listed shares of Credit Suisse were up 1.35% despite the bank reporting bigger-than-expected loss for the fourth quarter following its settlement with US authorities, and announcing plans to cut 5,500 jobs.

After the close, numbers are due from American International Group and Fossil.

On the data front, the producer price index rose 0.6% in January from 0.2% the month earlier and well above the 0.3% consensus forecast. Excluding food and energy, the index rose 0.4% from 0.1% in December 2016 and above the 0.2% expected.

Dow Jones - Risers

JP Morgan Chase & Co. (JPM) $88.98 0.94%
Goldman Sachs Group Inc. (GS) $248.49 0.90%
Nike Inc. (NKE) $56.35 0.46%
Wal-Mart Stores Inc. (WMT) $68.01 0.36%
Unitedhealth Group Inc. (UNH) $162.43 0.27%
Travelers Company Inc. (TRV) $120.01 0.25%
Apple Inc. (AAPL) $133.62 0.25%
Home Depot Inc. (HD) $140.21 0.24%
E.I. du Pont de Nemours and Co. (DD) $77.94 0.15%
3M Co. (MMM) $181.03 0.01%

Dow Jones - Fallers

Chevron Corp. (CVX) $111.93 -1.74%
Caterpillar Inc. (CAT) $97.38 -1.14%
Verizon Communications Inc. (VZ) $48.00 -1.13%
Procter & Gamble Co. (PG) $87.35 -1.09%
Microsoft Corp. (MSFT) $64.14 -0.90%
Exxon Mobil Corp. (XOM) $82.31 -0.84%
Pfizer Inc. (PFE) $32.42 -0.57%
Coca-Cola Co. (KO) $40.40 -0.53%
Intel Corp. (INTC) $35.64 -0.45%
Cisco Systems Inc. (CSCO) $31.83 -0.42%

S&P 500 - Risers

Hanesbrands Inc. (HBI) $21.07 3.03%
Kohls Corp. (KSS) $42.35 2.44%
Endo International Plc (ENDP) $12.40 2.44%
Signet Jewelers Ltd (SIG) $74.86 2.40%
PVH Corp. (PVH) $90.95 2.27%
Dun & Bradstreet Corp. (DNB) $104.58 2.22%
Nordstrom Inc. (JWN) $45.30 2.12%
Best Buy Co. Inc. (BBY) $44.82 1.93%
Universal Health Services Inc. (UHS) $120.08 1.87%
Staples Inc. (SPLS) $9.37 1.85%

S&P 500 - Fallers

Micron Technology Inc. (MU) $22.80 -4.62%
SCANA Corp. (SCG) $67.45 -3.68%
Hologic Inc. (HOLX) $38.63 -3.49%
Western Digital Corp. (WDC) $76.20 -2.89%
Apache Corp. (APA) $55.63 -2.71%
Martin Marietta Mtrl (MLM) $225.35 -2.61%
Centerpoint Energy Inc. (CNP) $25.98 -2.61%
Discovery Communications Inc. Class A (DISCA) $28.31 -2.48%
Noble Energy Inc. (NBL) $37.58 -2.29%
Discovery Communications Inc. Class C (DISCK) $27.49 -2.19%