Yellen's Dovish Testimony Leads To Strength On Wall Street - U.S. Commentary

(RTTNews) - Stocks moved mostly higher over the course of the trading day on Tuesday, as traders reacted positively to remarks by Federal Reserve Chair Janet Yellen. The gains on the day lifted the Dow and the S&P 500 to new record closing highs.

The major averages all closed in positive territory, although the tech-heavy Nasdaq edged up just 7.15 points or 0.1 percent to 4,968.12. The Dow advanced 92.35 points or 0.5 percent to 18,209.19 and the S&P 500 rose 5.82 points or 0.3 percent to 2,115.48.

The strength on Wall Street came as Yellen's semi-annual monetary policy testimony before the Senate Banking Committee was widely interrupted as dovish.

In prepared remarks, Yellen indicated that the Fed is not likely to begin raising interest rates for at least the next couple monetary policy meetings.

The Fed Chief also suggested that the central bank will hike interest rates only when they are "reasonably confident" that annual inflation is moving back toward their 2 percent target.

Jay Morelock, an economist at FTN Financial, said, "With regard to forward guidance, Yellen highlighted that once the word 'patience' was dropped from Fed communication, it will not mean that a rate hike is imminent."

"This tactic is an attempt to prevent a taper-tantrum like reaction to the drop of the word 'patient,' as well giving the Fed more flexibility on the timing of the first hike," he added.

With the spotlight on Yellen, traders largely shrugged off a report from the Conference Board showing a significant pullback in U.S. consumer confidence in the month of February.

The Conference Board said its consumer confidence index tumbled to 96.4 in February from an upwardly revised 103.8 in January, while economists had expected the index to drop to a reading of 99.1.

A separate report from Standard & Poor's showed that home prices in major metropolitan areas unexpectedly grew at a faster annual rate in the month of December.

Sector News

Steel stocks showed a strong move to the upside, regaining some ground after ending the previous session sharply lower. The NYSE Arca Steel Index surged up by 1.7 percent, partly offsetting the 2.3 percent loss posted on Monday.

AK Steel (AKS), Ternium (TX), and U.S. Steel (X) turned in some of the steel sector's best performances on the day.

Considerable strength also emerged among airline stocks, as reflected by the 1.7 percent gain posted by the NYSE Arca Airline Index. With the gain, the index reached its best closing level in almost a month.

Financial stocks also saw significant strength on the heels of Yellen's remarks, with the NYSE Arca Broker/Dealer Index and the Dow Jones Banks Index advancing by 1.3 percent and 1.1 percent, respectively.

Semiconductor and housing stocks also moved notably higher, while weakness was visible among commercial real estate and biotechnology stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index advanced by 0.7 percent, while Australia's All Ordinaries Index rose by 0.3 percent.

The major European markets also moved to the upside on the day. While the German DAX Index climbed by 0.7 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index both finished the trading day up by 0.5 percent.

In the bond market, treasuries moved notably higher in reaction to Yellen's congressional testimony. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, tumbled 7.1 basis points to 1.988 percent.

Looking Ahead

Yellen's second day of testimony on Capitol Hill is likely to attract some attention on Wednesday, although she may not provide much new information.

Trading could also be impacted by reaction to earnings news from Hewlett-Packard (HPQ), with the tech giant releasing its first quarter results after the close of today's trading.

Additionally, the Commerce Department is scheduled to release its report on new home sales in the month of January.