Fed seen keeping interest rates steady amid market volatility

The Federal Reserve is expected to leave interest rates unchanged on Wednesday and acknowledge that turmoil in financial markets threatens its upbeat view of the U.S. economy, leaving the chances of a March hike diminished but alive. 

The Federal Reserve headquarters in Washington September 16 2015.

All 69 analysts in a Reuters poll see the central bank keeping its key overnight lending rate in a range of 0.25 percent to 0.50 percent when it issues its policy statement following a two-day meeting. The decision is due at 2 p.m. EST (1900 GMT).

A month-long plunge in U.S. and world equities has raised concerns that an abrupt global slowdown could act as a drag on the U.S. economy, with investors now betting on only one quarter-point rate hike in 2016 instead of the four signaled in Fed policymakers' economic forecasts last month.

The Fed probably does not want to appear too worried by market and economic volatility that could prove temporary, and its rate-setting committee may soften concerns by pointing to solid U.S. job growth.

U.S. economic growth will accelerate this year to 2.4 percent from 2.1 percent last year, according to the median forecast of Fed policymakers last month. New forecasts are not due until March.

The Fed raised rates by a quarter point on Dec. 16 in a sign the economy had largely recovered from the 2007-2009 financial crisis and recession and was shrugging off weakness in China, Japan and Europe.

U.S. exports took a hit last year, in part due to the impact of a strong dollar .DXY, but consumer spending accelerated and overall employment surged by 292,000 jobs in December.

Investors saw almost no chance of a January rate hike and expected only two hikes for the whole year even before the Standard & Poor's 500 index .SPX fell 8 percent in the first three weeks of the year.

Fed's Kaplan: four hikes not a sure thing in 2016

Four U.S. interest-rate hikes are "not baked in the cake" for the Federal Reserve this year, particularly given global stock market volatility set off by fears over a cooling Chinese economy, a top Fed official said on Monday.

The Fed raised rates in December, the first rate hike in almost a decade and ending a seven-year stretch in which rates were held at a near-zero level in response to the 2007-2009 financial crisis and recession.

Investors are now focused on when the next rate hike will be, with economists predicting March.
Fed officials overall expect four rate hikes this year, according to the median of their forecasts from December.

"This is an unusual start to the year, obviously," Robert Kaplan, the Dallas Fed's new president, told reporters after a talk here.

Concern about slowing growth in China roiled world markets in August and forced the Fed to hold off raising interest rates in September.

This year has started off with global markets again rocked by plunges in Chinese stock markets, a fall in the yuan and subsequent heavy intervention by the Chinese authorities to push the yuan back up.

Fed opens meeting to put an end to crisis era policy

Eight years after a devastating recession opened an era of loose U.S. monetary policy, the Federal Reserve on Tuesday began a two-day meeting at which it is expected to turn in the other direction and raise rates in an increasingly normal economy.

The decision will be released on Wednesday at 2 p.m. (1900 GMT), with markets prepared for an initial 25 basis point "liftoff" that would move the Fed's target rate from the zero lower bound to a range of between 0.25 and 0.50 percentage points.

It is to be followed by a news conference by Fed Chair Janet Yellen to elaborate on the central bank's latest policy statement.

Markets on Tuesday set a positive stage for the Fed's potentially historic turn. U.S. stock indices were up around one percent, bond yields moved higher, and analysts said that after weeks of preparation a surprise decision not to hike would be the more disruptive choice.

The rate hike will separate the Fed from major central banks in Tokyo, Frankfurt, Beijing and elsewhere that are all battling to stimulate their economies and generate growth.

The initial hike expected on Wednesday will still leave U.S. policy extremely loose, and Fed officials have signaled they will act cautiously from that point forward to nurture a tepid recovery.

Markets and analysts will focus on the exact language the Fed uses in its statement to justify the hike and describe how it will evaluate the timing of a second and subsequent steps.

The Fed Awakens

After years of waiting, it's finally here. No, not the new "Star Wars" movie: Fed week.

Federal Reserve Chairman Janet Yellen walks after speaking at an event hosted by the Economic Club of Washington in Washington December 2, 2015.

Barring a shock, the Federal Reserve will raise U.S. interest rates on Wednesday for the first time since June 2006, a full year before the global financial crisis began.

Data releases will meanwhile give clues to the robustness of other economies, some of which are seen as vulnerable to investment outflows as higher interest rates make U.S. assets more attractive. Especially in emerging markets, where currencies and other assets have plunged in value this year, that process has already started.

Forecast-beating numbers on Saturday showing Chinese industrial output growth picked up to a five-month high of 6.2 percent in November signaled that stimulus measures from Beijing may be steadying the world's second-largest economy.

China's wobble has been a major uncertainty for the global outlook, so better fixed-asset investment and retail sales growth last month should offer investors and policymakers some reassurance.

The Bank of Japan's tankan survey on Monday showed business sentiment among big manufacturers holding steady, although they expected conditions to worsen in the next three months as sluggish emerging market demand weighs on exports.

Flash PMIs for France, Germany and the euro zone are due on Wednesday, hours before the Fed announces its decision.

Thursday's survey of French business sentiment will be the first taken in the euro zone's second-largest economy since the attacks that killed 130 people in its capital on Nov. 13.

Fed to take up 'too big to fail' emergency lending curb

The Federal Reserve Board will consider on Monday a proposal to curb its emergency lending powers, a change demanded by Congress after the central bank's controversial decision to aid AIG (AIG.N), Citigroup (C.N) and others in 2008.

A proposed rule, to be considered by the Fed's Washington-based board in an open meeting, would require that any future emergency lending be only "broad-based" to address larger financial market problems, and not tailored to specific firms.

The 2010 Dodd-Frank financial reform law instructed the Fed to curtail emergency loans to individual banks and prohibited it from lending to companies considered insolvent.

While some at the Fed worry the new rules will hamper the central bank's response in future crises, some politicians have said the proposed regulations are too imprecise, for example in defining insolvency, to prevent the types of deals done in 2008.

As the financial crisis intensified in 2008, the Fed invoked its little-used emergency lending power to stave off the failure of AIG and Bear Stearns, and help other "too big to fail" companies including Citigroup and Bank of America (BAC.N).

The Fed also enacted a series of more general emergency programs, in all providing $710 billion in loans and guarantees. Those programs were separate from the much larger Fed asset and bond purchases known as quantitative easing.

The loans have been repaid and the guarantees ended, ultimately earning the Fed a net profit of $30 billion, according to a September Congressional Research Service review.

Fed gives largest U.S. banks extra year for debt rule calculation

The Federal Reserve said on Wednesday that bigger U.S. banks would have an extra year to calculate a capital requirement known as the supplementary leverage ratio for stress testing.

The United States Federal Reserve Board building is shown in Washington October 28, 2014.

Institutions subjected to the leverage ratio requirement will have to show regulators what the ratio would be in a stressed scenario beginning in 2017.

The extension applies to banks with more than $50 billion of assets, of which there were 39 at the end of the third quarter, according to data from the Federal Deposit Insurance Corp.

The supplementary leverage ratio creates hard limits on how much debt banks can borrow relative to their assets, without giving banks credit for having relatively low-risk assets.

Analysts have said that the supplementary leverage ratio is creating distortions in a number of corners of the bond market, including interest-rate swaps and repo funding markets, by essentially making it more expensive for banks to fund positions in those markets.

Gennadiy Goldberg, U.S. rates strategist at TD Securities, said the delay is unlikely to have much of an impact on credit markets as banks typically look to comply with capital rules well ahead of their actually kicking in.

The change was one of several the Fed made to its rules for stress testing banks and assessing their readiness for dividend hikes and share buybacks. Many of the changes relate to the timing of compliance with certain requirements, though the Fed also removed a requirement for banks to make a calculation known as the tier 1 common ratio.

Fed officials again flag December; see smooth rates liftoff

Federal Reserve officials on Wednesday continued to flag December as a likely time for interest rates to rise after seven years near zero, with two expressing confidence they will be able to pull off a rate hike smoothly despite fears of an abrupt market reaction.

Investors reacted by increasing the odds for a rate increase next month to 72 percent, from 64 percent on Tuesday, based on interest rate futures prices.

Cleveland Fed President Loretta Mester repeated her position that the U.S. economy is now strong enough to absorb a modest policy tightening. 

Atlanta Fed President Dennis Lockhart, sitting alongside her on a panel in New York, said global financial markets have settled since the August turmoil that caused the U.S. central bank to delay raising rates.

Sentiment for a December hike took firm hold at the Fed's October 27-28 policy meeting, according to meeting minutes released on Wednesday that showed a solid core of U.S. central bankers poised for liftoff.

The Fed's October statement helped convince skeptical markets that a rate hike may finally be imminent after several years of near zero rates. 

But the October session also saw central bankers begin grappling with longer-term issues that may be relevant to the pace of subsequent rate hikes, including whether the U.S. economy's lower long-term potential means low interest rates will become a permanent norm.

For now, however, Fed officials seem confident that the central bank will meet its twin goals of full employment and stable two percent inflation.

White House threatens veto of rule-based monetary policy bill

The White House on Tuesday issued a veto threat for a Republican-backed bill to make the Federal Reserve set interest rate policy using a mathematical rule, a proposal Fed Chair Janet Yellen said would "severely damage" the U.S. economy.

The Obama administration opposes the proposal because it would hinder the Fed's ability to help the economy, the White House said in a statement.

"If the president were presented with (the legislation), his senior advisors would recommend that he veto the bill," the statement said.

Lawmakers in the U.S. House of Representatives cleared the way on Tuesday for vote on the bill, called the Fed Oversight Reform and Modernization Act, as soon as Wednesday.

The proposal, which could pass the Republican-controlled house, is not expected to become law but has nonetheless prompted a host of Fed policymakers to air their concerns.

Under the type of policy rule envisioned by lawmakers, the Fed would commit to moving interest rates up or down depending on the readings of economic indicators like the jobless rate and inflation.

In a letter to lawmakers, Yellen said the proposed law would hamstring the Fed's ability to respond to crises and would also be an intrusion on its independence.

Fed Reserve News

Fed rate hike 'makes sense', says U.S. central banker

Federal Reserve Bank President John Williams 

Now that the United States is closing in on full employment and inflation is likely to rise to target levels, the "next step" should be to start gradually increasing rates, a top U.S. central banker said on Saturday.

"I do think it makes sense to gradually remove the policy of accommodation that helped get the economy to where we are," San Francisco Federal Reserve Bank President John Williams told the Arizona Council on Economic Education.

The comments suggest that Williams, a centrist policymaker who was Fed Chair Janet Yellen's chief researcher when she had his job before moving to Washington, is leaning toward support of a December rate hike.

Asked afterward by a reporter whether that is so, Williams declined to say, adding that he expects "a lot of data" between now and then. "I am going to wait and see on that," he said.

The Fed has kept interest rates near zero for almost seven years, and the central bank last month said it would consider a rate increase at its Dec. 15-16 meeting, the last of the year

The explicit nod to the Fed's next meeting sent traders scrambling to boost bets on a December move, bets that only got bigger after a government report on Friday showed the economy added many more jobs than expected in October.

U.S. Stock Market News - Fed Chair Janet Yellen

Dollar hovers near three-month high, U.S. jobs awaited for rate clues

The dollar held firm on Friday with investors on tenterhooks over whether upcoming U.S. jobs data will be strong enough to cement rising expectations of a Federal Reserve interest rate hike next month.

The dollar index .DXY treaded water at 97.927, keeping in close reach of a three-month high of 98.135 .DXY =USD struck on Thursday.

"Fed policymakers appear to be trying to keep the possibility of a December rate hike alive since their last policy meeting," said Shinichiro Kadota, chief Japan forex strategist at Barclays.

Fed Chair Janet Yellen said on Wednesday that "liftoff" in interest rates in December was a live possibility, leading investors to think a rate hike will come next month unless economic indicators drastically weaken in coming weeks.

"There have been comments from Fed officials that appear to be attempting to lower the hurdle on the payroll increase. If payrolls increase about 170,000-180,000 as markets expect, rate hike expectations will heighten further," Barclays' Kadota said.

The median forecast for October nonfarm payrolls in a Reuters poll of economists is an increase of 180,000, above slightly sluggish job growth of 142,000 in September. The data is due at 1330 GMT.

Market focus was on how equities react to the jobs report if the data heightens prospects of a rate hike in December.

Federal Reserve News

Fed's Yellen sees possible December rate rise, gradual hiking path

Federal Reserve Chair Janet Yellen on Wednesday pointed to a possible December interest rate "liftoff" but said rates would rise only slowly from then on to nurture the U.S. economic recovery.

In her first public comments since the Fed's meeting last week Yellen laid out what now appears the base case at the U.S. central bank - that low unemployment, continued growth and faith in a coming return of inflation means the country is ready for higher interest rates.

They also caused investors to reset their expectations of a December rate hike above 60 percent, a sign that markets are finally taking the Fed's language seriously after a period in which U.S. central bankers were frustrated by the gap between their own outlook and market bets about their likely course of action.

"What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market and to return inflation to our 2 percent target over the medium term," Yellen said at a House Financial Services Committee hearing.

William Dudley, the influential president of the New York Fed and a permanent voter on policy, said later on Wednesday that he would "completely agree" with Yellen. December "is a live possibility, but we'll see what the data shows," he told reporters in New York.

Asian Stock Market News - Stocks Broke Rising Streak

Asian stocks falter as Fed makes case for possible December rate rise

Asian stocks broke a two-day rising streak on Thursday after top U.S. Federal Reserve officials kept the door open to a December interest rate hike, sending short-term U.S. bond yields to 4-1/2-year highs and giving a boost to a resurgent dollar.

European stocks are set to start cautiously with spreadbetters expecting Britain's FTSE 100 to open flat, Germany's DAX to rise 0.13 percent, and France's CAC 40 to open flat.
  
A U.S. interest rate hike, ordinarily a sign of a healthy global economy, would now come at the worst possible time for export-oriented Asian countries which are grappling with the twin effects of a slowing China and shrinking global trade.
  
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.4 percent, led by a 1 percent fall in Australian shares. While it has risen 12 percent since end-September, it is still down 10 percent so far this year.

In fresh signs that Asian countries were feeling the heat, central banks from Australia to Thailand voiced caution at their scheduled policy meetings this week while retail sales in Hong Kong fell for a seventh consecutive month.
  
In her first public comments since the Fed's meeting last week, Federal Reserve Chair Yellen said the U.S. was ready for higher interest rates if upcoming economic data justified them.

"If the incoming information supports that expectation then our statement indicates that December would be a live possibility," she said. In later comments, New York Fed President William Dudley agreed with Yellen.

The Fed chief's measured optimism was in direct contrast with disappointing earnings for struggling businesses in Asia.

Asian Stock Market News - China'a Factory

Asia's factories struggle with global demand gulf

An employee operates a machine as she works along a production line of a factory producing solar energy products in Shangrao, Jiangxi province, China, October 11, 2015.

Activity in China's colossal factory sector shrank in October as global demand stuttered, reinforcing the case for more stimulus and questioning whether the Federal Reserve can be confident enough to raise U.S. interest rates this year.

A crop of industry surveys out on Monday pointed to another poor month for trade across Asia as activity contracted in South Korea, Taiwan and Malaysia. Only Japan showed any hint of growth, perhaps thanks to the persistent weakness of the yen.

The run of pedestrian results will focus attention on the U.S. Institute for Supply Management (ISM) measure of manufacturing due later Monday which is forecast to have flatlined in October. ECONUS

The U.S. central bank surprised markets last month by downplaying global growth worries while opening the door wide to a rate hike in December.

Those optimists looking for signs of revival in Asia found slim pickings in the latest data.

Activity in China's manufacturing sector unexpectedly contracted in October for a third straight month, according to the official survey out on Sunday.

The Purchasing Managers' Index (PMI) held at 49.8 in October, missing market hopes for a break-even 50.0 reading, while new export orders shrank for the 13th month.

That was followed by the Caixin/Markit China PMI which focuses on small and mid-sized companies. It edged up to 48.3 in October, from 47.2, but still pointed to an eighth month of contraction.

China's woes are being felt among its neighbors. South Korea's exports slumped the most in more than six years in October, with hefty drops in shipments to China, the United States and Europe.

South Korea is the first major exporting economy to report monthly trade data and is home to global suppliers such as Samsung Electronics (005930.KS), Hyundai Motor (005380.KS) and Hyundai Heavy Industries (009540.KS).

The only promising news came from Japan where the Markit/Nikkei PMI hit the highest in a year at 52.4.

Federal Reserve News - Chair Janet Yellen

Stage set for Yellen to cut through rate-hike noise

Federal Reserve Chair Janet Yellen holds a news conference following the Federal Open Market Committee meeting in Washington in this file photo from September 17, 2015.

After putting a December interest rate rise back on the agenda, Janet Yellen may now need to reinforce that message in coming weeks by "crowding out" dissenting voices in the Federal Reserve and navigating through possibly contradictory economic data.

Markets rolled back bets that rates would remain pegged near zero until next year after the Fed's statement ending a two-day policy meeting made a specific reference to the next Dec. 15-16 session as an opportunity to consider a rate rise.

Yellen has long represented the view that a rate lift-off from near zero this year was the Fed's base scenario, but that message has been drowned out by some dissenting voices and mixed signals from a central bank that says it is "data dependent."

Analysts and former Fed officials say the Fed chief should use the bully pulpit, probably by early December, to either reaffirm that the central bank is on course to lift rates next month, or to definitively back down.

Failure to do so could set the stage for potential confusion, with markets possibly overshooting and sending borrowing costs sharply higher, tripping up the economic recovery.

Traders now give a 47 percent chance the Fed will raise rates for the first time in nearly a decade in December, up from 34 percent before Wednesday's statement.

Yellen now will have more time to watch inflation and jobs data roll in through November, starting with third-quarter economic growth on Thursday and a key measure of U.S. wages and salaries on Friday.

But with two Fed governors recently opposing the house view and urging patience on rates, and skepticism having grown among investors, Yellen may need to abandon her quest for consensus and more forcefully set the course for action.

Federal Reserve News - Fed Meeting This Week

Fed puts December rate hike firmly on the agenda

The U.S. Federal Reserve kept interest rates unchanged on Wednesday and in a direct reference to its next policy meeting put a December rate hike firmly in play.

Investors had expected the Fed to remain pat on rates, but the overt reference to December came as a surprise.

The central bank also downplayed recent global financial market turmoil and said the U.S. labor market was still healing despite a slower pace of job growth.

"In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress - both realized and expected - toward its objectives of maximum employment and 2 percent inflation," the Fed said in a statement after its latest two-day policy meeting.

Investors quickly placed bets reflecting a higher chance the U.S. central bank will raise rates in December, with futures contracts implying a 43 percent possibility compared to 34 percent prior to the statement.

Going into the Fed meeting this week, the market had viewed March as the most likely time for the central bank to begin its rates "liftoff," but it now sees a greater chance of that happening in late January.

The U.S. dollar rose sharply and yields for U.S. government debt soared in anticipation of higher rates. U.S. stock prices initially fell but regained momentum and closed sharply higher.

U.S. Stock Market News - Wall Street Set To Open Higher

Wall St. set to rise on Apple results; Fed awaited

Wall Street was set to open higher on Wednesday as investors await the Federal Reserve's latest policy statement, while Apple's strong results allayed some concerns about its business in China.

Apple (AAPL.O) sold 48 million iPhones in the quarter and reported a near doubling of revenue from China. The stock was up 1.5 percent at $116.35 in premarket trading.

The Fed's statement is due at 2:00 p.m. ET after its two-day policy meeting ends. While the central bank is not expected to raise rates at the meeting, traders will parse the statement for clues on when it will pull the trigger.

While the United States is starting to show signs of a slowdown, the global economy continues to remain fragile with China cutting rates further to stimulate growth.

U.S. stocks closed slightly lower on Tuesday after Ford's (F.N) results missed expectations and energy stocks slid.

At 8:26 a.m. ET, S&P 500 e-minis ESc1 were up 2.5 points, or 0.12 percent, with 108,167 contracts traded. Nasdaq 100 e-minis NQc1 were up 7.5 points, or 0.16 percent, on volume of 20,481 contracts. Dow e-minis 1YMc1 were up 15 points, or 0.09 percent, with 12,986 contracts changing hands.

Federal Reserve News - Federal Reserve Is Expected

Fed seen holding rates steady

The Federal Reserve headquarters in Washington

The Federal Reserve is expected to keep interest rates unchanged on Wednesday and may struggle to convince skeptical investors it can tighten monetary policy before the end of the year in the face of U.S. and global economic headwinds.

The world's most powerful central bank hasn't hiked rates in about a decade and markets see virtually no chance it will do so at the end of this week's two-day policy meeting. The Fed is scheduled to announce its rate decision at 2 p.m. ET (1800 GMT).

A spate of dismal data on the U.S. and global economies has fueled a public row between Fed Chair Janet Yellen and fellow policymakers, igniting speculation the central bank will wait until 2016 to begin its "liftoff" from near-zero rates.

Forty-six economists polled by Reuters unanimously expect the Fed on Wednesday to keep its target rate for overnight lending between banks steady at 0 percent to 0.25 percent, as it has since 2008 when it embarked on an effort to nurse the economy back from a severe recession.

A narrow majority of the economists expect a rate increase in December. Financial markets assign only a 30 percent chance for a December hike and a 54 percent chance for such a move in March.

The Fed could lay some of the tightening groundwork by using its policy statement to signal it has fewer concerns about global growth. 

Recent U.S. economic reports, however, have raised doubts about the strength of the world's largest economy, and it could be weeks before central bankers have enough new data to feel comfortable lifting rates.

That means the statement on Wednesday could resemble the one from last month's policy meeting. But September's disappointing employment report - non-farm payrolls grew by only 142,000 - has cast doubt on the sustainability of the jobs recovery and undercut the argument for hiking rates.

Global Stock Market News - Dollar Low In Asia

Dollar droops as equities come under pressure before Fed meeting

A bank clerk counting US dollar banknotes

The dollar was mostly lower in Asia on Tuesday, taking its cue from a broad move lower in regional equities and caution ahead of the U.S. Federal Reserve's two-day meeting that begins later in the session.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS skidded 0.7 percent, as China's key share indexes gave up more than 1 percent.

Adding to the risk-off mood, the U.S. Navy sent a destroyer within 12 nautical miles of artificial islands built by China in the South China Sea, in a challenge to Beijing's territorial claims there.

Frequently used as a China play because of Australia's significant trade with that country, the Aussie slipped about 0.1 percent to $0.7235 AUD=D4, and also shed about 0.6 percent on the 87.23 yen AUDJPY.

The greenback began the Asian session already on the back foot, after disappointing U.S. home sales data pushed down Treasury yields and prompted investors to pare bets that the Fed would opt to hike interest rates before year-end.

Data released on Monday showed new U.S. single-family home sales fell to near a one-year low in September after gaining for two straight months.

The disappointing figures backed expectations that the U.S. central bank will leave rates near zero on Wednesday, at the close of a two-day meeting beginning later in the session.

Against its Japanese counterpart, the dollar gave up about 0.4 percent to 120.58 yenJPY=, moving away from a 2-month high of 121.60 yen touched on Monday ahead of a Bank of Japan meeting on Friday.

U.S. Stock Market News - U.S Stock Index

Stock futures lower as hopes of monetary easing fade

Valeant Pharmaceuticals (VRX.N) sank nearly 14 percent to $100.50

U.S. stock index futures were slightly lower on Monday as investor optimism about central bank easing faded ahead of a Federal Reserve policy meeting this week.

* The Fed, which meets on Oct. 27-28, is scheduled to issue a statement on Wednesday. Investors will scrutinize it for a bearing on when the central bank could raise rates.

* While Fed Chair Janet Yellen has said the central bank could raise rates this year, it would do so only if there are clear signs of sustained economic growth.

* Traders are pricing in only a 6 percent chance of rates being increased on Wednesday and a 39 percent chance of a December hike, according to CME Group's FedWatch program.

* Wall Street closed higher on Friday after a rally in tech stocks helped the S&P 500 to positive territory for the year.

* Strong quarterly results from tech companies helped improve expectations on overall U.S. corporate earnings.

* S&P 500 earnings for the period are now expected to have declined a more modest 2.8 percent, compared with 4.9 percent forecast at the start of the reporting season, according to Thomson Reuters data.

* Data on new U.S. home sales is expected to show a decline to an annual rate of 550,000 units in September after two months of gains. The data is expected at 10:00 a.m. ET.

* Xerox's (XRX.N) shares were up 1.4 percent at $10.48 in premarket trading on Monday after it reported results and said it would review its operations.

* Valeant Pharmaceuticals (VRX.N) sank nearly 14 percent to $100.50. The company said it would set up a panel to probe allegations about its associations with specialty pharmacy distributor Philador.

Federal Reserve News - Chair Janet Yellen

Yellen, consensus-builder, needs to send strong signal at Fed meet

Federal Reserve Chair Janet Yellen holds a news conference following the Federal Open Market Committee meeting in Washington September 17, 2015.

Federal Reserve Chair Janet Yellen, praised as an adept listener and consensus builder, may need to adopt a stronger tone at this week's policy meeting if she expects to keep a December interest rate rise in play.

Yellen's inclusive style has been tested recently by two fellow governors who publicly appeared to disagree with her view, shared by Vice Chair Stanley Fischer, that the Fed will probably need to raise interest rates this year.

Governors are permanent members of the Fed's policy-making panel who typically vote with the chair, and it is unusual for them to publicly contradict the Fed chief. 

Yet both Lael Brainard and Daniel Tarullo, speaking shortly after Yellen and Fischer, listed an array of risks to economic growth that suggested rate hikes should wait.

Most other Fed voters, with the notable exception of the dovish president of the Chicago Fed, have suggested that they, like Yellen, support a 2015 rate rise. 

The arithmetic suggests Yellen could face as many as three dissents from her 10-member panel if she decides to raise rates at the Fed's December meeting.

What is perhaps more troubling for Yellen than the specter of dissents is that many investors do not believe the Fed will raise rates at all this year. Unless Yellen manages to shift those expectations well ahead of time, possibly starting with the Oct. 27-28 meeting, a rate hike could roil markets.

Yellen's style contrasts with that of some of her predecessors, notably Alan Greenspan, who used to dictate the outcome of meetings as, or even before, they began.

Yellen spends the better part of the days leading up to each policy-setting meeting talking in person or by phone with each of her 16 fellow policymakers, her schedules show. Not even Ben Bernanke, a former academic who like Yellen valued consensus, appears to have conferred as much on so regular a basis.