Yellen: Interest rate hike ‘probably in the coming months’

Key takeaway from Yellen’s Friday Harvard speech increases odds for June rate hike, with July a better possibility. Plus: the Maven’s 2003 Saturn VUE is DOA.

The Maven bids goodbye to pre-holiday bullishness as well as to his soon-to-be-former Saturn VUE. (Vintage GM PR image via Car and Driver)

WASHINGTON, May 27, 2016 – In very thin holiday-driven trading Friday, stocks opened with a decided upside bias. But mid-afternoon brought word that the Federal Reserve once again seems to be inching toward another ratchet up in interest rates, with the next incremental hike likely coming in early to mid-summer.

At least that’s the way markets interpreted Fed Chair Janet Yellen’s remarks at Harvard University Friday, where she told the audience “an interest rate hike is ‘probably’ appropriate in the coming months if economic data improve. It’s appropriate, and I’ve said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate.”

In its just-posted report, CNBC noted:

The Fed’s policymaking committee next meets on June 14 and 15. Markets priced in a roughly 28 percent chance of a hike in June and 57 percent in July before Yellen spoke, according to the CME Group. Those chances rose to 34 and 62 percent for June and July, respectively, after her comments.

Gee, and right when the Maven is being forced to buy a new or newish car, due to his aging Saturn’s increasing skill at playing dead. Just like Friday’s markets.

Unsurprisingly, those traders still not at the beach Friday for the Memorial Day holiday weekend have been pulling markets down since Yellen’s views hit the wires. As of 2:45 p.m. EDT Friday, the Dow, the S&P 500 and the NASDAQ are approach the flatline. A slightly in-the-red close isn’t out of the question, but the bulls may leave averages barely in the green, just because.

We’ll all likely see a more convincing reaction to Yellen’s wink-wink, nudge-nudge remarks one way or the other when trading resumes next Tuesday morning.

The problem with pre-holiday trading action is that it can be and often is extremely deceptive. The bulk of big-time traders, investors and hedge fund criminals—not to mention most of the federal government—probably took off to start their holiday earlier this week because they can. That tends to leave these pre-holiday markets in the hands of smaller funds, those individual traders still left in the game and, perhaps, a few intrepid HFT geeks running their supercomputers to take advantage of whoever happens to still be around—maybe even the Maven.

On low-volume days like these, you often get outlandish moves up or down in stocks and averages. Charting these moves or trading them as if they really mean something is generally foolish, so, aside from (perhaps) opportunistically snugging up a position here or sneaking in on a commission-free ETF trade there, we’re inclined to wait until Tuesday when any definitive reaction to Yellen’s remarks, or anything else, is more likely to have meaning.

Many traders will have returned from their holidays by then, having already thought out their next moves while taking their first late-spring cruise on their expensive yachts, quaffing expensive martinis and figuring out how to get even richer at the little guy’s expense. The Maven prefers to see which way these overcompensated clowns roll before making any more commitments.

Plus, even the proles can use a day or three off on occasion. For once, we’re getting some sun this weekend on the soggy East Coast, so the Maven plans to start goofing off right after posting this column, perhaps beginning to search for a new or late-model used car as well. Yes, alas, our rapidly aging 2003 Saturn VUE has pretty much reached the point of no return at around the 200,000-mile mark.

Saturns are now essentially as extinct as dodos. Trying to get parts for them is like searching for a still-drivable Yugo in mint condition, as in “why would you want to?”

The hassle in finding enough parts to rebuild our faithful V-6 AWD warhorse with its equally extinct, UK-built Saab engine, has become a major motivation driving our current search for an upgrade. We must confess, though, that we’ll miss our in-dash cassette player and pre-MP3 CD player, both standard in that pre-Great Recession model.

New autos are a lot costlier now, so we’ll be trying to go late-model used while also trying to learn all the new-tech that’s been going into these 21st versions of the horse and buggy. That could save us some $$$, although nothing out there seems to be cheap any more.

No trading diary today. It’s too boring. But sometimes, that’s the greatest gift the stock market can give you.

Meanwhile, even as we enjoy family holiday fun this weekend, let’s all be good Americans and pause to thank, at least silently, all the brave service men and women over the past two centuries who sacrificed our lives so we could actually continue to have the freedom in 2016 to have families, own homes and enjoy our holidays pretty much without worry. That, indeed, is the greatest gift of all.

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