The rally in U.S. stocks evaporated in the final hour of trading as speculation that the Federal Reserve will hold off on raising interest rates gave way to renewed concerns about the strength of the American economy. The dollar fell and Treasuries rose.
The Standard & Poor’s 500 Index capped a second day of volatile trading virtually where it began, after the gauge erased an advance that topped 1.5 percent at its height. Fed Chair Yellen signaled financial-market volatility could delay rate increases as the central bank assesses the turmoil’s impact on domestic growth. Ten-year Treasury yields slipped to 1.70 percent after an auction drew the lowest yield since 2012. The dollar dropped to the lowest since November and crude fell to a three-week low.
Yellen’s testimony before Congress did little to quell market volatility, as the central banker said the Fed still expects to raise rates gradually while making it clear that continued market turmoil alter forecasts. She highlighted uncertainty over the pace of China’s growth and the related rout in commodities, concerns that have roiled financial markets throughout the year and twice pushed global shares to the brink of a bear market.
Markets buckled earlier this week as Deutsche Bank sparked concern European bank creditworthiness was weakening as oil’s rout took crude below $ 28 a barrel. While central banks from Japan to Europe have signaled additional stimulus is at the ready, market volatility has intensified in recent weeks. Yellen’s acknowledgment that the turmoil has clouded global growth added to anxiety.
The S&P 500 was little changed at 4 p.m. in New York after rising as much as 1.5 percent. The Dow fell 0.6 percent as Disney shareholders overlooked a record quarter for sales and earnings at and focused on flagging profits at its ESPN sports network. Bank shares fell fastest in the final hour of trading as sentiment shifted.