Talk out of the Fed confirms higher rates on the horizon, banking sector breaks into sprint

The banking sector lead the S&P 500 index higher Wednesday as the biggest among them put up strong quarterly numbers and Federal Reserve Chair Janet Yellen confirmed that the central bank is likely to raise interest rates this year.

Yellen, delivering the Fed's mid-year economic outlook to Congress, said there are clear signs that the economy is getting stronger. She said the Fed will probably start raising interest rates later this year if those improvements continue.

The Fed's benchmark interest rate has been close to zero since December 2008, meaning that banks have not been making much on loans. That will begin to change if the Fed grows more confident that the economy is strong enough to bear those higher rates.

Many economists think the Fed will raise the benchmark rate at its September meeting, though Yellen has tried to downplay the importance and the timing.

Yet those rate hikes would arrive as banks distance themselves from the legacy of the financial crises. Major financial institutions have reported huge legal costs from mortgage activities that preceded the housing bust and the economic implosion that followed.

Those legal costs are beginning to fade.

Bank of America said Wednesday that its profit more than doubled because of lower legal costs, as well as an increase in deposits.

The day before, JPMorgan Chase posted a larger-than-expected profit, also citing lower legal costs and a reduced corporate tax rate.

Bank of America Corp. stock added 53 cents, or 3.1 percent, to $17.66 in morning trading and JPMorgan Chase & Co. picked up 1 cent to $69.05.

Shares of Wells Fargo & Co., which reported its second-quarter results Tuesday, rose 75 cents to $58.

Citigroup Inc. shares rose 59 cents to $56.50.

Shares of U.S. Bancorp, which reported its earnings Wednesday morning, rose $1.39, or 3.2 percent, to $45.27.

Regions Financial Corp. shares added 19 cents to $10.41.

Zions Bancorporation shares rose 37 cents to $31.49.