OVERNIGHT MARKETS AND NEWS

December E-mini S&Ps (ESZ15 +1.21%) are up sharply by +1.20% and European stocks are up +3.08% after Fed Chair Yellen late yesterday said the Fed is on course to raise interest rates later this year, which suggests the Fed has confidence that the U.S. economy is strong enough to handle an interest rate increase. The dollar index jumped to a 5-week high, while gold and government bond prices fell on expectations for a Fed rate hike. Asian stocks settled mixed: Japan +1.76%, Hong Kong +0.43%, China -1.60%, Taiwan +0.11%, Australia -0.58%, Singapore -0.46%, South Korea -0.20%, India closed for holiday. Japan’s Nikkei Stock Index recovered from a 2-week low and closed higher on speculation the BOJ may expand stimlus measures after Japanese Aug consumer prices ex-food and energy fell by the most in over 2 years. China’s Shanghai Composite closed lower on concern over capital outflows from China after an estimated record $141.66 billion left China in Aug after the PBOC devalued the yuan, surpassing the previous record outflow of $124.62 billion in Jul, according to data compiled by Bloomberg.

The dollar index (DXY00 +0.46%) is up +0.36% at a 5-week high. EUR/USD (^EURUSD) is down -0.59%. USD/JPY (^USDJPY) is up +0.62% at a 2-week high.

Dec T-note prices (ZNZ15 -0.29%) are down -10.5 ticks.

Speaking after the markets closed yesterday, Fed Chair Yellen said “most of my colleagues and I anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year.”

Japan Aug national CPI rose +0.2% y/y, stronger than expectations of +0.1% y/y. Aug national CPI ex-fresh food fell -0.1% y/y, right on expectations. Aug national CPI ex food & energy fell -0.2% y/y, right on expectations and the fastest pace of decline in 2-1/3 years.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) Q2 GDP (expected unrevised from last +3.7%) and Q2 personal consumption (expected revised to +3.2% from +3.1%), (2) St. Louis Fed President James Bullard’s appearance on a panel on monetary policy at an event in St. Louis, (3) Sep Markit services PMI (expected -0.5 to 55.6, Aug +0.4 to 56.1), (4) final-Sep U.S. consumer sentiment index from the University of Michigan (expected +0.8 to 86.5, prelim-Sep -6.2 to 85.7), and (5) Kansas City Fed President Esther George’s speech on the economy and monetary policy at an event in Omaha, NE.