NEW YORK – The Dow rose to a record high close while U.S. stocks kept their upward momentum Wednesday following Federal Reserve Chair Janet Yellen’s congressional testimony to gradually raise interest rates.
Yellen’s speech was a nod to Wall Street as the Fed signalled it will gradually tighten policy and gradually unwind its massive balance sheet. A neutral interest rate level refers to one that neither encourages nor discourages economic activity.
Investors cheered Yellen’s dovish tone, alleviating some concerns over the recent dip in inflation.
“People were worried about her coming out more hawkish. She said exactly what the market expected and that’s why the market was happy with it,” said Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners, based near Charlotte, North Carolina.
The rate-sensitive S&P 500 real estate index .SPLRCR was among the strongest in the benchmark index, posting a 1.3 percent gain, its biggest one-day percentage gain in about four months. Technology shares also rose sharply, with the tech index .SPLRCT also up 1.3 percent.
The dovish sentiment from the Fed at the same time put the S&P 500 financials .SPSY, which tend to benefit from higher rates, last among sectors, ending with just a gain of 0.1 percent.
The Dow Jones Industrial Average .DJI rose 123.07 points, or 0.57 percent, to close at 21,532.14, a record high. The Dow also hit an intraday record.