US traders wary ahead of Bernanke testimony
US stocks have snapped a three-day streak of records as investors looked ahead to testimony on the economy in Congress from Federal Reserve Chairman Ben Bernanke.
The Bernanke speculation also pushed the Australian dollar higher to 92.53 US cents this morning, up from 91.82 cents on Tuesday.
The Dow Jones Industrial Average fell 32.41 (0.21 per cent) to 15,451.85.
The broad-based S&P 500 gave up 6.24 (0.37 per cent) to 1,676.26.
Both the Dow and the S&P 500 had posted three straight days of record highs before Tuesday.
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The tech-rich Nasdaq Composite Index lost 8.99 (0.25 per cent) 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 petrol prices.
US industrial production also picked up in June, but analysts rated the results lacklustre compared with historic trends for this time of year.
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Brent Schutte, market strategist at BMO Private Bank in Chicago, said many investors were reticent to trade given Bernanke’s impending testimony to Congress on Wednesday night Australian time.
“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.
Earnings results were mixed.
Bond prices were higher. The yield on the 10-year Treasury bond fell to 2.53 per cent from 2.56 per cent late Monday, while the 30-year yield was at 3.58 per cent, down from 3.61 per cent. Bond prices and yields move inversely.
The Australian dollar is higher after the Reserve Bank of Australia’s minutes were interpreted by investors as suggesting there was less chance of future interest rate cuts.
At 0700 AEST on Wednesday, the local unit was trading at 92.53 US cents, up from 91.82 cents on Tuesday.
In the minutes of its July meeting, released on Tuesday, the RBA said it decided to leave the cash rate on hold at the record low of 2.75 per cent as it assessed the effects of earlier interest rate cuts as well as the falling, but still high, Australian dollar.
BK Asset Management managing director Kathy Lien said the Australian dollar had been driven upward by the less dovish RBA comments combined with downward pressure being placed on the US dollar ahead of US Federal Reserve chairman Ben Bernanke’s testimony before Congress on Wednesday (US time).
“We had the less dovish RBA minutes but we also had the rally in the Aussie compounded in the North American trading session because a lot of US investors reduced their US dollar positions ahead of the testimony by Bernanke tomorrow,” Lien said from New York.
“Bernanke is speaking to Congress and they are going to push him to continue to take efforts to stimulate the US economy. So, while the central bank has talked about tapering, I think he will focus on reassuring Congress that there will still be plenty of stimulus in place.”
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