Positive Reaction To Yellen Leads To Rally On Wall Street - U.S. Commentary

(RTTNews) - With traders reacting positively to new Federal Reserve Chair Janet Yellen's first day of Congressional testimony, stocks moved sharply higher during trading on Tuesday. The strong gains on the day extended the upward trend shown by the markets over the past few sessions.

The major averages ended the day firmly in positive territory, with the S&P 500 climbing back above 1,800. While the S&P 500 jumped 19.91 points or 1.1 percent to 1,819.75, the Dow surged up 192.98 points or 1.2 percent to 15,994.77 and the Nasdaq climbed 42.87 points or 1 percent to 4,191.04.

The rally on Wall Street came as traders seemed relieved that Yellen offered few surprises in her testimony before the House Financial Services Committee.

In prepared remarks, Yellen indicated that she expects a great deal of continuity in the Fed's approach to monetary policy.

She predicted that the Fed would continue to reduce the pace of asset purchases in measured steps at future meetings but noted that purchases are not on a preset course.

Yellen also reiterated that a highly accommodative policy will remain appropriate for a considerable time after the asset purchases end.

The new Fed chief mentioned the recent volatility in global financial markets but expressed her belief that the developments do not currently pose a substantial risk to the U.S. economic outlook.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "Bottom line, 'continuity' is what she said in her statement and that seems to be exactly what we got as her testimony was very similar to the last FOMC statement."

In the question-and-answer portion of her testimony, Yellen said it would take a notable change in the economic outlook for the Fed to consider pausing its asset purchase tapering.

Sector News

Gold stocks saw substantial strength throughout the session, adding to the strong gains posted in the two previous sessions. The NYSE Arca Gold Bugs Index surged up by 4.2 percent, reaching its best closing level in over three months.

The strength among gold stocks came amid a notable increase by the price of the precious metal, with gold for April delivery climbing $15.10 to $1,289.80 an ounce.

Significant strength was also visible among steel stocks, as reflected by the 2.5 percent gain posted by the NYSE Arca Steel Index. AK Steel (AKS) and Steel Dynamics (STLD) turned in two of the sector's best performances.

Oil service stocks also showed a strong move to the upside on the day, driving the Philadelphia Oil Service Index up by 2.2 percent. The gains came even though the price of crude oil ended the day modestly lower.

Railroad, defense, retail, and semiconductor stocks also saw considerable strength, reflecting broad based buying interest on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved to the upside on Tuesday, although the Japanese market was closed for a holiday. Hong Kong's Hang Seng Index jumped by 1.8 percent, while Australia's All Ordinaries Index rose by 0.6 percent.

The major European markets also saw notable strength on the day. While the German DAX Index surged up by 2 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index advanced by 1.2 percent and 1.1 percent, respectively.

In the bond market, treasuries moved to the downside after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 2.719 percent.

Looking Ahead

Trading activity on Wednesday may be somewhat subdued amid a lack of major U.S. economic data. Investors are likely to be looking ahead to the release of reports on weekly jobless claims, retail sales, and business inventories on Thursday.