* Yellen says U.S. recovery incomplete, but certain stocks
* ZEW sentiment reading at lowest level since January 2013
* Crude oil prices fall steeply
(Adds Yellen testimony, updates to the open of U.S. trading;
changes dateline; previous LONDON)
By Ryan Vlastelica
NEW YORK, July 15 U.S. stocks slipped on
Tuesday, with riskier equities hit hardest after the U.S.
Federal Reserve, in an unusual statement, singled out the
valuation of social media and biotechnology shares as
Bond prices fell slightly and gold was lower as Fed Chair
Janet Yellen's comments suggested interest rate hikes could come
sooner than anticipated if the labor market continued to
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," even as 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
1.9 percent on the day.
"These are the subindustries that have caused a lot of
long-time stock watchers to scratch their heads. These companies
have relative few earnings, especially in the biotech area,"
said Kim Forrest, senior equity research analyst, Fort Pitt
Capital Group in Pittsburgh.
Overall, Yellen said the U.S. economic recovery was
incomplete and she defended the central bank's accommodative
monetary policies. She said some signs of a pickup in inflation
were not enough for the Fed to accelerate its plans for raising
interest rates, 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," she said.
That comment boosted bond yields modestly. The U.S. 10-year
Treasury note turned negative, falling 2/32 of a
point in price, the yield rising to 2.554 percent.
Gold prices fell 0.7 percent and are down more than 3
percent this week. Copper was up 0.1 percent.
U.S. crude oil fell 1.7 percent to $99.16, falling
under $100 per barrel for the first time since May. Brent crude
tumbled 2.3 percent to three-month lows as rising supplies from
Libya overshadowed renewed violence in the country.
The Dow Jones industrial average was down 11.43
points, or 0.07 percent, at 17,043.99. The Standard & Poor's 500
Index was down 5.71 points, or 0.29 percent, at 1,971.39.
The Nasdaq Composite Index was down 30.34 points, or
0.68 percent, at 4,410.08.
The MSCI World Index and a measure of
European equities both lost 0.2 percent, due to weakness in
Europe and the slight decline in the United States. European
shares hovered around session lows following a drop in Germany's
ZEW index of economic sentiment. The MSCI International ACWI
Price Index fell 0.2 percent.
Yellen's comments overshadowed some strong results from U.S.
U.S. financial shares were boosted by results from both
JPMorgan Chase & Co and Goldman Sachs Group Inc.
But they pared those gains after Yellen began her testimony.
The U.S. dollar index rose 0.2 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 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)