* Rates won’t have to rise too much to reach neutral level –
* Temporary factors appear to be holding down inflation –
* Fed to release Beige Book at 2 p.m. ET
* Indexes up: Dow 0.52 pct, S&P 0.66 pct, Nasdaq 0.91 pct
(Updates to early afternoon)
By Sweta Singh and Tanya Agrawal
July 12 (Reuters) – U.S. stocks were higher in early
afternoon trading on Wednesday, with the Dow at record levels,
after Federal Reserve Chair Janet Yellen said interest rates
hikes would be gradual and will not have to rise much further to
reach a neutral level.
Yellen, in a prepared testimony delivered to Congress, said
the Fed would wind down its massive massive bond portfolio while
keeping a close watch on the low inflation.
The testimony depicted an economy that, while growing
slowly, continued to add jobs, benefited from steady household
consumption and a recent jump in business investment.
Investors and some Fed officials, concerned with the recent
dip in inflation, have been wanting to see a surer progress
toward the central bank’s goal of 2 percent inflation.
Yellen said some temporary factors appear to be at work in
holding down inflation but the Fed was focused on achieving the
“It was a little bit more dovish than most had thought,”
said Richard Scalone, co-head of foreign exchange at TJM
Brokerage in Chicago.
“She said rates won’t have to rise much further to get to
neutral, I thought that was key. She said inflation response to
economy is a key uncertainty, alluding to the inflation again,
part of the dovishness.”
The U.S. central bank will also issue its Beige Book at 2
p.m. ET, a compendium of anecdotes on the health of the economy.
The Fed’s next policy meeting is on July 25-26.
At 12:47 p.m. ET (1647 GMT), the Dow Jones Industrial
Average was up 111.34 points, or 0.52 percent, at
21,520.41, slightly easing from its record high of 2158.79.
The S&P 500 was up 16.2 points, or 0.667895 percent,
at 2,441.73 and the Nasdaq Composite was up 56.47
points, or 0.91 percent, at 6,249.78.
Microsoft, Facebook and Amazon gave
the biggest boost to the S&P and the Nasdaq.
Amazon shares edged up 1 percent after the online retailer
said its Prime Day sale was the biggest shopping event by sales
in its history.
Ten of the 11 major S&P 500 sectors were higher, with the
real estate index’s 1.26 percent rise leading the
The financial index, which is sensitive to rate
hikes, was the only laggard and was trading little changed.
Chances of an interest rate hike at the Fed’s December
meeting fell to 53 percent from 60 percent after the release of
Yellen’s testimony, according to CME Group’s FedWatch tool.
Investors will be keeping an eye on second-quarter earnings
reports on Friday from big U.S. banks including JPMorgan Chase
, Wells Fargo and Citigroup.
Advancing issues outnumbered decliners on the NYSE by 2,317
to 567. On the Nasdaq, 1,995 issues rose and 763 fell.
(Reporting by Sweta Singh and Tanya Agrawal in Bengaluru;
Editing by Arun Koyyur)