US dollar, stocks fall ahead of Bernanke testimony

Agence France-Presse
The US dollar, bond yields and stocks fall ahead of two days of testimony to Congress on the economy by Federal Reserve Chairman Ben Bernanke

REVERSAL. US stocks snap out from 3 days of record highs ahead of the US Fed chair's testimony before Congress. Photo by EPA

NEW YORK CITY, USA – The US dollar sagged and US bond yields fell, while US stocks snapped a 3-day streak of records, on Tuesday, July 16, ahead of two days of testimony to Congress on the economy by Federal Reserve Chairman Ben Bernanke.

The pullback came amid speculation on whether Bernanke would confirm the Fed’s path toward trimming back its $85 billion-a-month quantitative easing (QE) bond purchases later this 2013 or signal that economic growth needs more strength before that happens.

At 2100 GMT, the euro was at $1.3164, compared to $1.3064 late Monday.

The dollar also fell to 99.04 yen from 99.82, while the euro was barely changed at 130.43 yen.

Stock markets

At the closing bell, the Dow Jones Industrial Average fell 32.33 (0.21%) to 15,451.93

The broad-based S&P 500 gave up 6.24 (0.37%) to 1,676.26. Both the Dow and the S&P 500 had posted 3 straight days of record highs before Tuesday.

The tech-rich Nasdaq Composite Index lost 8.99 (0.25%) to 3,598.50.

Tuesday’s losses came after a series of mixed earnings results and economic indicators.

Consumer prices rose more than expected in June, but the difference was mainly due to higher gasoline prices. US industrial production also picked up in June, but analysts rated the results lackluster compared with historic trends for this time of year.

Brent Schutte, market strategist at BMO Private Bank in Chicago, said many investors were reticent to trade given Bernanke’s impending testimony.

“I don’t think you can discern too much out of market activity today just because I don’t believe too many people are getting in front of what Bernanke has to say tomorrow,” Schutte said.

Bernanke testimony

Bernanke will speak to the House of Representatives Financial Services Committee Wednesday morning, with the state of US economic growth and the Fed’s 5-year-old easy-money policy — and its plan for interest rates — the key topic.

Bernanke has strained to explain in recent weeks that even if the Fed begins reeling in the quantitative-easing program, it does not mean that interest rates will be increased and monetary policy will be tightened before 2015.

But markets have shown their doubts, with bond yields and interest rates climbing sharply since May in expectation of tightening.

Currency analyst David Song at DailyFX said he expects a confirmation of the plan to begin exiting QE, which could strengthen demand for the greenback.

“The growing discussion at the Federal Reserve to taper the asset-purchase program may prompt US lawmakers to press Mr. Bernanke,” he said.

“Any potential comments surrounding the timing and the pace of the exit should prop up the reserve currency as the (Fed) appears to be slowly moving away from its easing cycle.”

The pound pushed higher, to $1.5155 from $1.5100, while the dollar fell to 0.9391 Swiss franc from 0.9480. –

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