Wall Street hits record, dollar climbs after Yellen remarks

Tue Feb 14, 2017 4:31pm EST
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By Chuck Mikolajczak

NEW YORK (Reuters) - Financial stocks lifted the S&P 500 to a record closing high for a fourth consecutive session on Tuesday and the dollar strengthened as U.S. Federal Reserve Chair Janet Yellen struck a hawkish tone on the timing of an interest rate hike.

Yellen told the U.S. Senate Banking Committee the central bank will likely need to raise interest rates at an upcoming meeting, although she expressed caution about the considerable economic policy uncertainty under the Trump administration.

Financial stocks .SPSY moved higher following her remarks and closed up 1.2 percent as the best performing sector of the S&P 500. Utilities .SPLRCU and real estate .SPLRCR, which tend to weaken in a rising rate environment, ended down 0.7 percent and 0.5 percent, respectively.

The Fed signaled in December that it expected to raise rates three times in 2017.

The dollar reversed course after Yellen's comments and was up 0.3 percent after touching a three-week high of 101.38 against a basket of major currencies .DXY.

"It’s actually a very wise move to try to get the rate hikes going sooner rather than later to cut off the potential for inflation, although I really don’t see inflation picking up all that much over the next year or so," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Thomson Reuters data shows traders see a 17.7 percent chance of a 25-basis-point hike in rates at the Fed's March meeting.

The greenback was initially under pressure following the resignation of President Donald Trump's national security adviser, Michael Flynn, over revelations he had discussed U.S. sanctions against Moscow with the Russian ambassador to the United States before Trump took office.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 6, 2017.  REUTERS/Lucas Jackson