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U.S. stocks advanced on Wednesday as Federal Reserve Chairwoman Janet Yellen emphasized the central bank's gradual approach to normalizing monetary policy and expressed optimism about the economy in congressional testimony.
The S&P 500 advanced by 17 points, or 0.7%, to 2,442 with all 11 main sector trading higher. Real estate, technology and materials shares rose at least 1%.
The Dow Jones Industrial Average added 118 points, or 0.6%, to 21,524, trading above its previous closing high set last month and briefly touching an intraday record of 21,580.79 earlier in the session. DuPont (DD), Microsoft Corp.(MSFT) and Home Depot Inc.(HD) were the best performers among blue-chip companies, up more than 1% in early trade.
Meanwhile, the Nasdaq Composite Index rose 59 points, or 1%, to 6,252.
"This is what a dovish rate hike cycle looks like and the stock market is liking it," said Michael Antonelli, equity sales trader at Robert W. Baird & Co., referring to the Fed's plans to lift interest rates and reduce its $4.5 trillion asset portfolio without disrupting stock and bond markets that have been supported by crisis-era quantitative-easing programs.
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"It was all about whether we will have two more rate hikes this year and it seems like the Fed instead will be using the balance sheet rather than Fed-funds rates to normalize monetary policy," he said.
Yellen's remarks come as other central bankers have been expressing a desire to taper easy-money policies that have been in place in the aftermath of the 2008-'09 financial crisis. A so-called more hawkish tilt by global central bankers also had led some to believe that the Fed might be encouraged to ramp up its pace of rate hikes despite sluggish inflation.
"It seems like [Yellen's] dialing back a little bit of the hawkish sentiment from last time," said Karyn Cavanaugh, senior market strategist at Voya Financial. "She's back to looking at inflation a little bit more. The market was a little worried but she's back to the same dovish Yellen."
The yield on the 10-year Treasury note fell 4 basis points to 2.316% as bond prices, which move inversely to yields, rose, while the dollar weakened against major rivals, sending the ICE Dollar , a gauge of the buck against a half-dozen rivals, up 0.1% at 95.72.
Yellen said "the evolution of the economy will warrant gradual increases in the federal-funds rate over time to achieve and maintain maximum employment and stable prices."
See:Live blog and video of Yellen's testimony before House panel (http://blogs.marketwatch.com/capitolreport/2017/07/12/live-blog-and-video-of-yellens-testimony-before-house-panel/)
Beyond monetary policy, political tensions, which pressured the U.S. dollar lower on Tuesday, continued to weigh on greenback Wednesday. The dollar bought Yen113.06 Japanese yen , down from Yen113.94 in late Tuesday trade.
Tuesday trade saw equity benchmarks log modest losses after Donald Trump Jr. released a series of email exchanges about a June 2016 meeting to discuss potential incriminating information against Hillary Clinton, as part of an alleged Russian push to support his father's presidency.
Also read: Trump impeachment likelier than ever after Junior's emails, bookie says (http://www.marketwatch.com/story/trump-impeachment-likelier-than-ever-after-juniors-emails-bookie-says-2017-07-12)
Check out:Republicans to press Yellen on plan to reduce Fed's outsize role in economy (http://www.marketwatch.com/story/republicans-to-press-yellen-on-fed-plans-to-reduce-its-outsized-role-on-us-economy-2017-07-11)
See:Is Janet Yellen still calling the tune in financial markets? (http://www.marketwatch.com/story/is-janet-yellen-still-calling-the-tune-in-financial-markets-2017-07-10)
In other Fed-related news on Wednesday, the Beige Book comes out at 2 p.m., followed by Kansas City Fed President Esther George giving a speech in Denver at 2:15 p.m. Eastern on the economic outlook and the Fed's balance sheet.
Stock movers: Shares in NRG Energy Inc.(NRG) soared 20% after the company launched transformation plan (http://www.marketwatch.com/story/nrg-energy-reveals-transformation-plan-to-cut-costs-slash-debt-and-divest-assets-2017-07-12) to cut costs, slash debt and divest assets.
Snap Inc.(SNAP) shares fell 1%, adding to a 9% fall on Tuesday (http://www.marketwatch.com/story/snap-downgraded-to-equal-weight-by-one-of-its-lead-underwriters-2017-07-11), when it fell further below its initial-public-offering price.
Shares of PayPal Holdings Inc.(PYPL) and Square Inc.(SQ) traded higher after one analyst suggested (http://www.marketwatch.com/story/paypal-should-buy-square-analyst-says-and-square-hits-a-new-high-2017-07-11) PayPal should acquire Square. PayPal shares rose 4.4%, while Square shares advanced 1.1%.
United Continental Holdings Inc.(UAL) shares rose 4.1% after investment firms raised their price targets on the airline operator.
Energy companies advanced tracking a nearly 2% jump in oil prices (http://www.marketwatch.com/story/oil-extends-gains-after-upbeat-us-production-data-2017-07-12). Shares of Exxon Mobil Corp.(XOM) added 0.7% and Chevron Corp.(CVX) gained 1.1%.
Shares of Fastenal Co.(FAST) declined 3.2% following an earlier gain after a well-received earnings report (http://www.marketwatch.com/story/fastenal-shares-jump-76-premarket-after-earnings-beat-2017-07-12).
Other markets: Asian stocks closed mixed (http://www.marketwatch.com/story/asian-market-gains-take-a-timeout-as-currencies-rise-2017-07-11), while Europe staged solid gains across the board (http://www.marketwatch.com/story/european-stocks-rise-lifted-by-oil-firms-and-burberry-2017-07-12).
Gold (http://www.marketwatch.com/story/gold-tries-for-third-straight-win-as-investors-settle-in-for-yellens-policy-update-2017-07-12) rose 0.4% to just over $1,220 an ounce and all other key metals were also on the rise.
--Sara Sjolin in London contributed to this article.
(END) Dow Jones Newswires
July 12, 2017 13:24 ET (17:24 GMT)