STOCKS FALL, DOLLAR SURGES: Here's what you need to know

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Stocks bounced around all day on Friday but ultimately closed in the red. The main event on Friday was a speech from Federal Reserve chair Janet Yellen, which signaled the Fed will likely raise rates this year.

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First, the scoreboard:

  • Dow: 18,275.19, -10.55, (-0.06%)
  • S&P 500: 2,130.99, +0.17, (0.01%)
  • Nasdaq: 5,101.20, +10.41, (0.20%)

And now, the top stories on Friday:

  1. Fed chair Janet Yellen said it will be appropriate to raise rates sometime this year. She spoke at the Greater Providence Chamber of Commerce on Rhode Island. Here's the relevant excerpt: "Because of the substantial lags in the effects of monetary policy on the economy, we must make policy in a forward-looking manner. Delaying action to tighten monetary policy until employment and inflation are already back to our objectives would risk overheating the economy. For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy."
  2. Yellen however emphasized that the rate-hiking process will be gradual, and it will likely be "several years" before the Fed gets interest rates to where it expects them to be over the long term. We asked Allianz chief economic advisor Mohamed El-Erian for takeaways from the speech. One of the seven things he noted was that this will not be a traditional tightening process, and "this cycle will end up being the "loosest tightening" in the modern history of central banking."
  3. Inflation rose as expected in April. Consumer prices climbed 0.1% in April, as expected. Over the prior year, prices fell 0.2%, also in-line with expectations. "Core" inflation, which excludes the more volatile costs of food and gas, rose 0.3% over the prior month and 1.8% over the prior year, a bit more than expected. Energy continued to be a drag on headline inflation, with its index falling 19.4% year-over-year.
  4. The US dollar spiked following the inflation data. The dollar index jumped nearly 1% to as high as 96.31, the highest level in over three weeks. The euro fell to as low as $1.1002 against, the lowest since late April.
  5. The count of US oil rigs fell at the slowest pace in 24 weeks. Data from Baker Hughes showed that the number of oil rigs fell this week by 1 to 659, the lowest count since August 20, 2010. The count of combined oil and gas rigs fell by 3 to 885, the lowest since June 12, 2009. Some analysts have noted that shale drillers are beginning to prioritize profitability over output.
  6. Aeropostale shares fell as much as 16% after the retailer posted weaker-than-expected sales. It posted an adjusted earnings per share loss of $0.56, compared to estimates for $0.55, and sales of $318.6 million, below estimates for $326.2 million. The company is hinging near-term growth on the upcoming 'Back to School' season, but analysts are expressing doubts. Jeffries and FBR & Co. lowered their price targets.
  7. John Deere beat earnings expectations for the second quarter, as strong sales of construction equipment offset weakness in the agricultural and farm sectors. The company also put out a bullish outlook for US housing, and bleak forecasts for commodity prices over the next year. Its performance: EPS of $2.03 (versus $1.56 expected) and sales of $7.4 billion (versus $7.51 billion.)

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