U.S. stocks moved higher in afternoon trading Wednesday after Federal Reserve chair Janet Yellen told Congress that the central bank expects to raise interest rates at a gradual pace. The gains were broad, with real estate companies leading the pack as a slide in bond yields made high-dividend paying stocks more attractive. Energy stocks also rose as the price of crude oil climbed.
KEEPING SCORE: The Standard & Poor’s 500 index gained 18 points, or 0.8 percent, to 2,443 as of 2 p.m. Eastern time. The Dow Jones industrial average rose 132 points, or 0.6 percent, to 21,541. The Nasdaq composite added 61 points, or 1 percent, to 6,254. The Russell 2000 index of smaller-company stocks picked up 9 points, or 0.7 percent, to 1,422. The Dow was trading above its record high.
YELLEN EFFECT: In her semiannual testimony before Congress on the economy, Yellen said the central bank expects to keep raising a key interest rate at a gradual pace and also plans to start trimming its massive bond holdings this year. Yellen cited a number of encouraging factors, including strong job gains and rising household wealth that she said should drive economic growth over the next two years. Many economists believe the Fed, which has raised rates three times since December, will increase rates one more time this year.
THE QUOTE: Yellen’s remarks on the economy and interest rate policy suggests the central bank may not need to raise interest rates as much as the market has been expecting, said Rob Haworth, senior investment strategy director at U.S. Bancorp Wealth Management.
“By holding rates lower, that means capital or investment remains somewhat cheaper for companies and the economy should be able to do well with rates perhaps not rising as much as some of us had feared,” Haworth said.
LEADING THE PACK: Real estate investment trusts and other high-dividend paying stocks were among the big gainers, benefiting from rising bond prices, which pulled bond yields lower. Extra Space Storage rose $1.58, or 2.1 percent, to $75.71. American Tower climbed $2.74, or 2.1 percent, to $133.67.
TECH SURGE: Technology companies also notched solid gains. PayPal was up $2.19, or 4 percent, to $56.95. Nvidia rose $5.89, or 3.8 percent, to $161.77.
DEBT PLAY: NRG Energy soared 20.4 percent after the company said it plans to raise up to $4 billion through asset sales in order to lower its debt. The stock was the biggest gainer in the S&P 500, climbing $3.33 to $19.63.
HIGH FLYERS: Several airlines were trading higher after American Airlines Group and United Continental reported solid results for June. American Airlines gained $1.76, or 3.4 percent, to $53.37. United Continental picked up $3.03, or 3.9 percent, to $79.95. Delta Air Lines rose $1.03, or 1.9 percent, to $55.31.
CLEANING UP: ABM Industries climbed 3.5 percent after the cleaning and maintenance services company said it will buy facilities services company GCA from Thomas Lee Partners and Goldman Sachs. The stock added $1.42 to $42.11.
BONDS: Bond prices rose. The yield on the 10-year Treasury note fell to 2.33 percent from 2.37 percent late Tuesday.
OIL: Benchmark U.S. crude rose 74 cents, or 1.6 percent, to $45.78 per barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, gained 53 cents, or 1.1 percent, to $48.05 per barrel in London.
METALS: Gold rose $4.40 to $1,219.10 an ounce. Silver added 14 cents to $15.89 an ounce. Copper inched up 1 cent to $2.68 a pound.
MARKETS OVERSEAS: Stocks turned higher in Europe, sending Germany’s DAX up 1.5 percent, while France’s CAC 40 gained 1.6 percent. Britain’s FTSE 100 rose 1.2 percent. Markets in Asia finished mostly lower. Japan’s Nikkei 225 fell 0.5 percent and South Korea’s Kospi lost 0.2 percent. Hong Kong’s Hang Seng index rose 0.6 percent.
CURRENCIES: The dollar fell to 113.32 yen from 113.84 yen late Tuesday. The euro weakened to $1.1415 from $1.1476.