* Yellen says U.S. recovery incomplete, but certain stocks
* JPMorgan, Goldman rally after results, boosting Dow
* Germany's ZEW sentiment reading at lowest level since
* Crude oil prices fall steeply
(Updates to close of U.S. trading)
By Ryan Vlastelica
NEW YORK, July 15 U.S. stocks closed mostly
lower on Tuesday, after the Federal Reserve, in an unusual
statement, singled out the valuation of social media and
biotechnology shares as "substantially stretched."
Bond prices were flat but gold fell as comments by Fed Chair
Janet Yellen suggested that interest rates hikes could come
sooner than anticipated if the labor market continued to
Separately, oil prices tumbled amid rising supply from
On Wall Street, bank stocks provided some support and put
the Dow into slightly positive territory. JPMorgan Chase & Co
and Goldman Sachs outperformed after reporting
The Fed's semi-annual monetary policy report, which
accompanied Yellen's testimony to the Senate Banking Committee,
noted that overall U.S. stock valuations were "generally at
levels not far above their historical averages," though it
singled out riskier sectors of the market.
Social media and biotechnology shares slumped following the
release of the report, with the Nasdaq Biotech Index down
"These are the subindustries that have caused a lot of
long-time stock watchers to scratch their heads," said Kim
Forrest, senior equity research analyst at Fort Pitt Capital
Group in Pittsburgh. "These companies have relative few
earnings, especially in the biotech area."
Overall, Yellen said the U.S. economic recovery was
incomplete and she defended the central bank's accommodative
monetary policies. Some signs of a pickup in inflation were not
enough for the Fed to accelerate its plans for raising interest
rates, she said, but improved labor markets might accelerate the
"If the labor market continues to improve more quickly than
anticipated by the Committee, resulting in faster convergence
toward our dual objectives, then increases in the federal funds
rate target likely would occur sooner and be more rapid than
currently envisioned," Yellen said.
Bond yields initially rose after her comments, but the U.S.
10-year Treasury note ended essentially flat,
dipping 1/32 of a point in price to yield 2.554 percent.
Gold prices fell 1 percent and are down more than 3
percent this week. Copper rose 0.1 percent.
U.S. crude oil fell 0.9 percent to $100.01 per
barrel. Brent crude lost 1 percent as rising supplies from Libya
overshadowed renewed violence in the country.
The Dow Jones industrial average rose 5.26 points, or
0.03 percent, to 17,060.68, the S&P 500 lost 3.82 points,
or 0.19 percent, to 1,973.28, and the Nasdaq Composite
dropped 24.03 points, or 0.54 percent, to 4,416.39.
The MSCI World Index fell 0.3 percent while
European shares ended down 0.4 percent, pressured by a
drop in Germany's ZEW index of economic sentiment. The MSCI
International ACWI Price Index fell 0.25
While Yellen's comments were the day's primary driver,
financial shares helped major indexes recover from early
Both JPMorgan and Goldman Sachs rose after their results.
JPMorgan finished up 3.5 percent to $58.27 and was the biggest
gainer on both the Dow. However, another Dow component, Johnson
& Johnson, fell 2 percent to $103.28 after its results.
The U.S. dollar index rose 0.25 percent, while the
euro fell to a one-month low against the dollar on
higher-than-forecast inflation data from Britain.
The Bank of Japan maintained its stimulus program and stuck
to a forecast that inflation will approach its 2 percent target
next year, unfazed by recent data casting doubt on its scenario
of an investment-led economic recovery.
Japan's Nikkei average rose 0.6 percent, while
shares in Hong Kong rose 0.5 percent.
The MSCI Emerging Market index, MSCI's benchmark
emerging equity index, inched up 0.3 percent to a 16-month high.
Asian stock markets showed little reaction to
stronger-than-expected new loan and money supply data for China.
Chinese banks gave 1.08 trillion yuan ($173.90 billion) of new
loans in June, beating expectations of 915 billion.
The data, coming ahead of GDP and other numbers from China
due on Wednesday, underscored the perception that the Chinese
economy is stabilizing after a shaky start to the year but still
needs more policy support to meet Beijing's growth target.
(Editing by Dan Grebler and Leslie Adler)