Wall Street eyes Yellen speech for rate clues

When members of the Federal Reserve speak, Wall Street tunes in. But when Fed Chair Janet Yellen shares her views on interest rate policy, it takes on more of an E.F. Hutton-type moment made famous in the ex-brokerage firm’s advertising slogan, “When E.F. Hutton talks, people listen.”

Well, Janet Yellen is speaking Tuesday, delivering a luncheon speech on a topic of great interest to global investors. She will share her thoughts on the economic outlook and monetary policy. In short, she will discuss whether the economy is strong enough to handle another interest rate hike at one of the Fed’s coming meetings. The Fed meets next in April. Wall Street is betting on a rate hike no earlier than June.

Yellen’s comments come at a critical time for markets, as the stock rally that began Feb. 11 has lost some momentum. It also follows the Fed’s decision on March 16 to pare back the number of rate hikes it expects this year to two from four.

Fed stands pat on rates; signals more gradual hikes

The Yellen speech also comes on the heels of comments last week from Dennis Lockhart of the Federal Reserve Bank of Atlanta, suggesting the next rate hike could come as early as April.

Wall Street wants to know if the “dovish” Yellen still sees a Fed hike as farther off, or whether she is now learning toward Lockhart’s more “hawkish” timetable.

“The real question for the market is will Yellen show a change in attitude?” says Jim Paulsen, chief investment officer at Wells Capital Management. Where Yellen comes down on the  rate-timetable issue could determine if the stock market is vulnerable to a “Yellen disappointment” or if she creates “enough excitement for the market to break out to the upside.”