US open: Markets mostly higher with December rate hike in the offing

US equity markets were mostly higher on Thursday as investors largely shrugged off Reserve chair Janet Yellen all but confirming a December rate hike in her testimony to Congress.

The Dow Jones Industrial Average dropped 0.02% to 18,863.55 points, but the S&P 500 rose by 0.21% to 2,181.46 points, and the Nasdaq climbed 0.21% to 5,305.82 points at 1526 GMT.

Yellen, who appeared before the joint economic committee on Capitol Hill, said the Fed expects the growth of the US economy “will warrant only gradual increases in the federal funds rate over time to achieve and maintain maximum employment and price stability".

Neil Wilson, market analyst at ETX Capital, said there was slight rise in US Treasury yields, but there was little effect on financial markets after Yellen said interest rates could rise soon.

“The fact is a December rate hike has already been priced in – markets think there is a roughly 90% chance the Fed will increase the target federal funds rate. It now looks almost impossible for the Fed not to raise rates next month – it’s painted itself in a corner and has to respond with a hike or all hell will break loose in the markets.

“Today’s jobless numbers – showing unemployment at a four-decade low – only strengthens the case for the Fed to act. Rising bond yields since Donald Trump’s win further add to the argument for the central bank to raise rates. Longer term, Trumpflation may not be all it’s cracked up to be as a savings glut exists globally.

“The dollar is trading just shy of its highest level in 13 years, while the pound is trading virtually unchanged against the greenback.”

On the date front, the Labor Department revealed that initial jobless claims dropped 19,000 from the previous week to 235,000, better than the expected rise to 257,000. This was the lowest number of Americans filing for unemployment benefits in 43 years.

It also said that the consumer price index in October increased 0.4% after rising 0.3% in September, and in line with expectations.

In the 12 months to October, the index surged 1.6%, which was the biggest year-on-year increase since October 2014.

The Commerce Department said that housing starts rose more than expected in October, surging 25.5% from the revised September figure to a seasonally-adjusted rate of 1.32m. This was a nine-year high and surpassed expectations for an increase to 1.15m.

In commodity markets, gold on Comex increased by 0.07% to $1,224.70 per troy ounce at 1450 GMT.

Oil prices gained, as Brent crude rose 1.7% to $47.44 per barrel and West Texas Intermediate was up 1.74% to $46.38 at 1502 GMT.

In currency markets, the dollar climbed 0.32% against the yen to 109.43, but was down 0.04% versus sterling to 0.8034 and lower by 0.05% against the euro to 0.9349.

In corporate news, shares in Wal-Mart fell 3.32% as the retail behemoth’s third-quarter revenue rose less than expected and profit fell.

Revenue was up 0.7% to $118.2bn, below expectations for $118.69bn, while profit dropped to $3.03bn, or 98 cents a share, compared with $3.3bn and $1.03 a year ago, but above projections of 90 cents to $1.

However, Best Buy’s shares surged 6.75% as the electronics retailer’s fourth-quarter revenue rose above forecasts.

Revenue grew 1.4% to $8.95bn, above expectations of $8.4bn and profit increased to $194m, or 60 cents a share, from $125m or 37 cents last year.

Gap and Applied Materials are slated to report earnings after markets close.