Stocks Close Firmly Positive, Dow Reaches Record High - U.S. Commentary

(RTTNews) - Following the mixed performance seen in the previous session, stocks moved mostly higher during trading on Wednesday. With the upward move on the day, the Dow reached a new record closing high.

The major averages ended the day firmly in positive territory. The Dow rose 123.07 points or 0.6 percent to 21,532.14, the Nasdaq surged up 67.87 points or 1.1 percent to 6,261.17 and the S&P 500 advanced 17.72 points or 0.7 percent to 2,443.25.

The strength on Wall Street came as traders reacted positively to Federal Reserve Chair Janet Yellen's remarks before the House Financial Services Committee.

In her semiannual monetary policy testimony, Yellen said additional gradual rate hikes are likely to be appropriate over the next few years.

"Even so, the Committee continues to anticipate that the longer-run neutral level of the federal funds rate is likely to remain below levels that prevailed in previous decades," Yellen said.

Yellen noted that there remains uncertainty about the outlook for inflation and said the Fed will be monitoring inflation developments closely in the months ahead.

The Fed chief also said the central bank is likely to begin a program to gradually reduce the size of its $4.5 trillion balance sheet this year.

Paul Ashworth, Chief U.S. Economist at Capital Economics noted Yellen did not offer specific guidance on the timing of either the next interest rate hike or when balance sheet normalization would begin.

"This is not a complete surprise, however, since it is still too early for the Fed to tip its hand on what it will do at September's FOMC meeting," Ashworth said.

He added, "It makes a lot more sense to wait and absorb another couple of months' worth of data, before providing a stronger steer to the markets around the time of the Jackson Hole conference."

Later in the day, the Fed released its Beige Book, which said economic activity expanded across all twelve Fed districts in June, with the pace of growth ranging from slight to moderate.

The Beige Book also said prices continued to rise modestly in the majority of districts, although a few districts noted that price pressures had eased slightly.

Sector News

Airline stocks showed a substantial move to the upside on the day, resulting in a 2.3 percent jump by the NYSE Arca Airline Index. The index reached its best closing level in almost sixteen years.

United Continental (UAL) led the airline sector higher after reporting a 3.4 percent increase in June revenue passenger miles.

Significant strength was also visible among computer hardware stocks, as reflected by the 2 percent advance by the NYSE Arca Computer Hardware Index. Supermicro (SMCI) and Logitech (LOGI) posted standout gains.

Internet stocks also turned in a strong performance, driving the Dow Jones Internet Index up by 1.8 percent. With the gain, the index reached a seventeen-year closing high.

Tobacco, software, semiconductor, and chemical stocks also moved notably higher on the day, reflecting broad based strength on Wall Street.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index fell by 0.5 percent, while China's Shanghai Composite Index dipped by 0.2 percent.

Meanwhile, the major European markets moved sharply higher on the day. While the U.K.'s FTSE 100 Index jumped by 1.2 percent, the German DAX Index and the French CAC 40 Index surged up by 1.5 percent and 1.6 percent, respectively.

In the bond market, treasuries extended the upward move seen over the two previous sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.5 basis points to 2.327 percent.

Looking Ahead

Yellen's second day of testimony on Capitol Hill is likely to attract attention on Thursday along with reports on producer prices and weekly jobless claims.