Janet Yellen leads Wall Street to a 2016 high
NEW YORK -Stocks closed at their highest level of the year Tuesday as investors welcomed the latest signal from the Federal Reserve that it will move slowly to raise interest rates. Big names including Apple and Microsoft led technology stocks higher as the market made its biggest gain in two weeks.
The Dow Jones industrial average rose 97.72 points, or 0.6 percent, to close at 17,633.11. The Standard & Poor's 500 index gained 17.96 points, or 0.9 percent, ending at 2,055.01 Aided by the gains in tech stocks and in small cap stocks, the Nasdaq composite index climbed 79.84 points, or 1.7 percent, to finish at 4,846.62.
Stocks rose after Yellen confirmed that the Fed isn't in a hurry to raise interest rates. The Fed made similar points just two weeks ago, but since then, some members of the Fed's decision making committee had said they thought it was time for rates to go higher. Yellen's remarks boosted all corners of the market, and the price of gold rose along with stocks. Bond prices also rose and yields sank.
"A little bit of self-doubt started to enter the trading public's mind," said Sam Stovall, U.S. equity strategist for S&P Capital IQ. "She reassured investors."
Stocks were trading slightly lower before Yellen's remarks, but they moved higher after the text of her comments was released. The price of gold climbed, while bond yields fell and the dollar weakened. The yield on the 10-year U.S. Treasury note slid to 1.80 percent from 1.89 percent. The euro rose to $1.1295 from $1.1200. The dollar slipped to 112.75 yen from 113.28 yen. Gold rose $15.70, or 1.3 percent, to $1,235.80 an ounce.
Apple climbed $2.51, or 2.4 percent, to $107.70 after the FBI dropped its legal efforts to force Apple to break into the iPhone used by Syed Farook, who along with his wife killed 14 people in San Bernadino, California, in December. The FBI said it was able to hack into the phone, and it asked a court to vacate an order forcing Apple to help. Apple had been fighting the government's efforts and said it will continue trying to make its products more secure.
Microsoft added $1.17, or 2.2 percent, to $54.71. Information technology company SAIC advanced $5.33, or 11.5 percent, to $51.88 after its fourth-quarter profit was far larger than analysts expected.
Utility and telecommunications stocks, which pay hefty dividends similar to bonds, also traded higher.
Financial stocks made only small gains and lagged the market. They are able to charge more money on lending when interest rates are higher, so the Fed's low-rate policy has hurt the sector. So has the weakening price of oil, because investors are worried that loans to energy companies won't be repaid.
Bank of America fell 20 cents, or 1.5 percent, to $13.42, and Wells Fargo lost 65 cents, or 1.3 percent, to $48.05.
In her remarks to the Economic Club of New York, Yellen said the Fed expects to move slowly because the U.S. economy and financial conditions have weakened over the last few months, and global pressures could harm the U.S. economy. Those concerns include the possibility of a broad economic slump, lower oil prices, and the shaky stock market.
The Fed cited similar reasons earlier this month, when it said it expected to raise rates twice this year, not four times.
Benchmark U.S. crude dropped $1.11, or 2.8 percent, to $38.28 a barrel in New York. Brent crude, used to price international oil, lost $1.13, or 2.8 percent, to $39.14 a barrel in London.
Home building companies rose after Lennar reported strong quarterly results, selling more homes at higher prices. Its stock gained $1.48, or 3.2 percent, to $48.18. Competitor D.R. Horton rose 90 cents, or 3 percent, to $30.72, and PulteGroup added 39 cents, or 2.2 percent, to $18.51.
Drugmaker Medivation fell after a group of legislators took aim at the company over the price of its prostate cancer treatment Xtandi. They urged federal agencies to cut the price of Xtandi and asked for public hearings. Xtandi is Medivation's only approved drug, and its average list price is about $129,000 a year. Sales topped $1 billion last year. Medivation stock shed $2.50, or 6.1 percent, to $38.75.
Retailer Conn's skidded $3.84, or 24.5 percent, to $11.81 after its quarterly profit came up short of estimates and its 2016 forecasts disappointed investors.
In other commodities trading, heating oil fell two cents to $1.16 a gallon. Natural gas rose 3 percent to $1.90 per 1,000 cubic feet. Silver picked up 4 cents to $15.23 an ounce. Copper prices slumped 3 cents, or 1.4 percent, to $2.21 a pound.
Overseas markets were mixed. France's CAC 40 added 0.9 percent and Germany's DAX picked up 0.4 percent. The FTSE 100 index of leading British shares was little changed. Japan's benchmark Nikkei 225 lost 0.2 percent, and South Korea's Kospi added 0.6 percent. Hong Kong's Hang Seng gained 0.1 percent.