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Investors Are Turning Their Attention To Fed Chair

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DOW – 65 = 18,481
SPX – 11 = 2175
NAS – 42 = 5217
10 Y + .02 = 1.56%
OIL – 1.30 = 46.80
GOLD – 13.10 = 1324.80

Today marks the first anniversary of a chaotic day in the markets.The S&P 500 lost 77.7 points, or 3.9%, and China’s Shanghai Composite crashed more than 8%, less than a week after the People’s Bank of China announced it was devaluing its currency.

Investors are turning their attention to Fed chair Janet Yellen to see whether she will endorse recent comments from other central-bank officials that indicated rates could rise as early as next month. Yellen is scheduled to speak at the Jackson Hole Wyoming economic symposium on Friday. Recent economic news in the US has been pretty good. Several Fed policymakers have made some hawkish comments in the past few days suggesting the Fed will hike rates in September.

Predictably the idea that the Fed is contemplating a rate rise while all the other major central banks are looking to provide more stimulus led to a stronger US dollar and weaker commodity prices. Odds of an increase in September have climbed to 28 percent, from 10 percent a month ago, while bets on a December hike have risen to 51 percent from 36 percent at the end of July.

With earnings season almost complete, stocks have barely budged in the past 32 trading sessions, but yesterday the S&P 500 and the Nasdaq hit intra-day record highs. The S&P 500 index rose almost 20% since reaching a 22-month low in February, and trades near its highest valuation in more than decade, based on estimated income.

Meanwhile, the CBOE Volatility Index (or VIX) is close to a two-year low. At a mean level around 12 this month, the measure of market turbulence known as the VIX is the lowest for any August since 1994, and has been below 15 for 35 days, the longest stretch of calm since July 2014.

The National Association of Realtors says sales of existing homes fell 3.2% last month to a seasonally adjusted annual rate of 5.39 million. The decline marks a reversal from rising demand that pushed sales in June to their highest level since February 2007. Fewer homes are coming onto the market, putting a cap on sales growth. The number of listings dropped 5.8% from a year ago to 2.13 million, and so it is tougher to find the right property. The median home sales price was $244,100 in July, up 5.3% from a year ago.

The American Petroleum Institute (API), a trade group, reported on Tuesday that U.S. crude inventories rose 4.5 million barrels in the week ending Aug. 19 versus market expectations for a draw of around 500,000 barrels. Crude inventories climbed by 2.5 million barrels in the week ended Aug. 19, according to an Energy Information Administration report. Crude oil dropped about 3% today.

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