Stocks Close Higher Even As Yellen Hints At Rate Hike - U.S. Commentary

(RTTNews) - With traders seeming to shrug off concerns about higher interest rates, stocks managed to end Friday's trading mostly higher. The gains on the day lifted the Nasdaq and the S&P 500 their best closing levels in over a month.

The major averages saw further upside going into the close, finishing the day at their highs for the session. The Dow rose 44.93 points or 0.3 percent to 17,873.22, the Nasdaq advanced 31.74 points or 0.7 percent to 4,933.51 and the S&P 500 climbed 8.96 points or 0.4 percent to 2,099.06.

With the gains on the day, the major averages moved notably higher for the week. The Nasdaq surged up by 3.4 percent, while the S&P 500 and the Dow jumped by 2.3 percent and 2.1 percent, respectively.

The higher close on Wall Street partly reflected the strong upward momentum seen earlier this week, which helped the major averages recover from their lowest levels in about two months.

Traders also kept an eye on remarks by Federal Reserve Chair Janet Yellen, who hinted at the likelihood of a summertime interest rate hike.

During a conversation with Harvard Professor Gregory Mankiw, Yellen said she expects the economy to continue to improve and said it may be appropriate for the Fed to raise rates in the coming months.

"I think for the Fed to gradually and cautiously increase our overnight interest over time and probably in the coming months, such a move would be appropriate," Yellen said.

The Fed Chief also said she expects inflation to move back up to the central bank's 2 percent objective as crude oil prices have steadied near $50 a barrel after plunging to $26 a barrel earlier in the year.

Yellen's remarks came after the Commerce Department released a report early in the day showing stronger than previously estimated first quarter GDP growth.

The report said the pace of GDP growth in the first quarter was upwardly revised to 0.8 percent from the initial estimate of 0.5 percent.

Nonetheless, the revised GDP growth in the first quarter compares to the 1.4 percent jump seen in the fourth quarter and the 0.9 percent increase expected by economists.

A separate report from the University of Michigan showed a modest downward revision to its consumer sentiment index for May, although the index was still at an eleven-month high.

Sector News

Many of the major sectors showed only modest moves on the day, although considerable strength was visible among electronic storage stocks. The NYSE Arca Disk Drive Index surged up by 3 percent to its best closing level in a month.

Violin Memory (VMEM) showed a substantial move to the upside, with the memory-based storage systems developers soaring by 24.2 percent.

Biotechnology, brokerage, and internet stocks also saw notable strength on the day, contributing to the higher close by the broader markets.

On the other hand, gold stocks fell sharply, dragging the NYSE Arca Gold Bugs Index down by 3 percent. The weakness in the sector came as the price of gold dropped to a three-month low.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index rose by 0.4 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

The major European markets also ended a choppy trading day modestly higher. The U.K.'s FTSE 100 Index, the French CAC 40 Index and the German DAX Index all inched up by 0.1 percent.

In the bond market, treasuries saw further downside following Yellen's remarks after seeing modest weakness early in the session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 2.8 basis points to 1.851 percent.

Looking Ahead

Following the long holiday weekend, economic data is likely to be in focus next week, particularly the monthly jobs report due next Friday.

Reports on personal income and spending, consumer confidence, and manufacturing and service sector activity may also attract attention along with the Fed's Beige Book.

On the earnings front, Medtronic (MDT), TiVo (TIVO), Ciena (CIEN), and Broadcom (BRCM) are among the companies due to report their quarterly results next week.