What Janet Yellen Didn't Say Is Dovish: Citi

Following last month’s Federal Reserve commentary, Wall Street was caught off-guard by how hawkish the Fed seemed about the idea of a June interest rate hike. Janet Yellen’s speech on Monday at the World Affairs Council of Philadelphia painted a completely different picture.

According to Citi analyst Steven Englander, last week’s extremely weak U.S. jobs report had a major impact on Yellen’s tone. Englander sees more insight in what Yellen didn’t say than what she said.

“Unless the sky is falling in there is no way that she can express pessimism—would be self-defeating, so you take it as a given that she will sound optimistic on hitting targets in [the] long-term, Englander explains.

“The vagueness on the timing of hikes is what is striking.”

Related Link: JPMorgan Reviews The 'Emotional Jobs Report'

Just last month, Yellen expressed confidence that the next interest rate would happen “in coming months,” but she gave no indication of such a timetable on Monday.

Englander highlighted the parts of Yellen’s Monday speech in which she addressed Friday’s weak jobs number, including the following:

“Although this recent labor market was, on balance, concerning, let me emphasize that one should never attach too much significance to any single monthly report… That said, the monthly labor market report is an important economic indicator, and so we will need to watch labor market developments carefully,” Yellen said.

After selling off on Friday following the report, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 0.5 percent in Monday’s session.

Disclosure: the author holds no position in the stocks mentioned.