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Yellen Teases Rate Hike, VIX Hits New Low, Shake Shack Sizzles


Today's financial recap and tomorrow's financial outlook.

In a speech at 1:00 p.m. this afternoon, Fed Chair Janet Yellen said that it would be "appropriate" for the Fed to hike interest rates this year.

However, in keeping with recent trends with Fed speakers, her overall message was mixed.

Yellen reiterated her belief that the first-quarter economic slowdown was transitory.

But still, she emphasize that the rate increase process would be very slow and gradual, and also expressed some concern over jobs data. Yellen said the labor market is "approaching full strength" but added that "we are not there yet."

Earlier in the day, the Consumer Price Index surprised economists with a hot reading.

While the overall CPI rose 0.1%, in-line with expectations, core CPI, which excludes volatile food and energy costs, rose 0.3%, which was above the 0.2% consensus.

US stock futures and Treasuries fell on the news initially, but made up some ground during the day.

Biotechnology and cybersecurity stocks exhibited relative strength, which helped the NASDAQ Composite show minor outperformance.

The most interesting datapoint for the day, however, was the intraday collapse in the VIX.

The VIX dropped to 11.82 just after the release of Yellen's speech text, a new low for 2015.

This indicated that traders expect very little volatility in the near-term, and is perhaps a sign of investor complacency. Other market indicators, like VIX futures spreads and the ISE Index also showed a lack of caution intraday.

After some back and forth action this afternoon, the S&P 500 finished at 212X.XX, down X.X%.

Transportations stocks continued underperforming, and small caps also struggled. .

The 10-year US Treasury yield rose 2.9 bps to 2.20% while the US dollar index rose 1%.

In stock news, Deere (DE) rose 4.3% to $93.33 on its impressive earnings report.

Burger chain Shake Shack (SHAK) retained its status as a momentum superstar with a 3.3% rally to $92.86.

Today was Shake Shack's sixth straight up day, and it has risen 42% in the process.

Unusually, the stock has zero buy ratings from Wall Street analysts, and the highest target price on the stock is just $60, according to data from Bloomberg.

Tuesday's Financial Outlook

US markets will be closed Monday in observance of Memorial Day.

We'll be walking into an extemely busy economic calendar on Tuesday, with durable goods, FHFA house price index, S&P/CaseShiller home price, Markit PMI, new home sales, consumer confidence, Richmond Fed, and Dallas Fed data on tap.

AutoZone (AZO) will report earnings before the open.

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