/Reuters
The S&P 500 lifted into positive territory on Tuesday after Federal Reserve Chair Janet Yellen said the central bank should proceed “cautiously” on raising interest rates – music to Wall Street’s ears.
In her first comments since the Fed held steady on rates earlier this month, Yellen said global risks remained, including uncertainty over China and low oil prices.
Yellen’s cautious tone contrasted with recent comments from other policymakers, including the chiefs of the Philadelphia and Atlanta Federal Reserves, who had expressed support for a more aggressive approach to raising interest rates this year.
Fed funds futures implied that traders now see a 46 percent chance the Fed will raise rates by a quarter point at its July policy meeting, below the 51 percent chance seen on Monday, according to CME Group’s FedWatch program.
The market liked Yellen’s “moderate” remarks, said Peter Cardillo, chief market economist at First Standard Financial in New York. “She’s basically throwing a little cold water on the said ‘hawkishness’ that the market was worried about last week.”
Economic and financial troubles in countries around the world have led policymakers to project slower path of rate hikes than initially expected in December. Along with a strong dollar, they are hurdles for U.S. multinationals that are struggling to expand.
“The multiples we are at today reflect ongoing questions about economic growth and the ability of companies to generate strong revenue growth,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.
At 2:19 pm, the Dow Jones industrial average .DJI was up 0.46 percent at 17,615.96 points and the S&P 500 .SPX gained 0.7 percent to 2,051.27. The Nasdaq Composite .IXIC added 1.39 percent to 4,833.23.
Stocks had been down slightly before Yellen spoke.
The U.S. Treasury market rallied, with yields hitting multi-week lows, while the dollar weakened after her comments.
Seven of the 10 major S&P sectors were higher, led by tech stocks. The S&P financial sector .SPSY fell 0.35 percent.
The energy index .SPNY rose 0.21 percent despite a 2.7 percent drop in Brent crude oil. U.S. stocks and the price of oil have often moved in lockstep in recent months but that was not the case Tuesday.
Shares of banks, which stand to gain from higher interest rates, were the biggest drags on the S&P 500. Bank of America (BAC.N) fell 2.53 percent, while Wells Fargo (WFC.N), JPMorgan (JPM.N) and Citigroup (C.N) each declined over 1 percent.
Advancing issues outnumbered decliners on the NYSE by 2,333 to 670. On the Nasdaq, 2,052 issues rose and 718 fell.
The S&P 500 index showed 35 new 52-week highs and one new low, while the Nasdaq recorded 47 new highs and 40 new lows.
(Additional reporting by Yashaswini Swamynathan and Abhiram Nandakumar in Bengaluru; Editing by Nick Zieminski)
