U.S. Stocks Climb to Records on Rate Bets After Yellen Comments

(Bloomberg) — U.S. stocks rose, sending benchmark gauges to records, after Federal Reserve Chair Janet Yellen indicated an increase in interest rates is unlikely before mid-year as inflation and wage growth remain too low.

The Standard & Poor’s 500 Index rose 0.3 percent to a record 2,115.48 at 4 p.m. in New York. The Dow Jones Industrial Average gained 92.35 points, or 0.5 percent, to 18,209.19, as Home Depot Inc. and JPMorgan Chase & Co. rallied. The Nasdaq Composite Index added 0.1 percent, climbing for a 10th straight day to bring it within 1.6 percent of its 2000 record. About 6.1 billion shares changed hands on U.S. exchanges, 11 percent below the three-month average.

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“We have some more time where rates are not going to change dramatically over the near-term,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “The market’s interpreting it as a continuation of policy until proven otherwise — going to need to see continued evidence, job growth, inflation or economic growth picking up before they’re going to change their forward guidance.”

The S&P 500 has gained 2.8 percent this year and the Dow has added 2.2 percent. The Nasdaq Composite rallied 5.1 percent in the past 10 days, the longest winning streak since July 2009. Apple Inc., which has the biggest weighting in the Nasdaq Composite, has surged 20 percent this year.

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The Chicago Board Options Exchange Volatility Index lost 6 percent to 13.69, the lowest since Dec. 5. The gauge, know as the VIX, is on track for its worst month ever.

Yellen said in testimony before the Senate Banking Committee inflation that wage growth remain too low even as the job market improves, and she signaled that a change in the Fed’s guidance on interest rates won’t lock it into a timetable for tightening.

Fed Patience

She repeated that the Fed’s pledge to be “patient” on beginning to raise the benchmark interest rate means an increase is unlikely for “at least the next couple” of meetings. The central bank adopted the guidance in December and repeated it in January.

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Investors have been seeking clues on the timing of a U.S. interest-rate increase. San Francisco Fed President John Williams said he wouldn’t rule out a move in June, the Nikkei newspaper reported.

Fed Minutes

The S&P 500 rose last week as minutes from the central bank’s latest meeting showed some policy makers argued for keeping rates low for longer amid risks facing the economy.

The Federal Open Market Committee pointed to a strengthening dollar, international flash points from Greece to Ukraine, and slow wage growth as weakening the case for the first rate rise since 2006, according to a record of the Jan. 27-28 meeting.

“The momentum remains to the upside,” Steve Sosnick, equity risk manager at Timber Hill, the market-making unit of Greenwich, Connecticut-based Interactive Brokers Group Inc., said by telephone. “Volumes have not necessarily been impressive but it’s some combination of ‘don’t fight the Fed’ and ‘the trend is your friend.’”

Among economic reports Tuesday, the Conference Board’s consumer confidence index decreased to 96.4 in February from 103.8 a month earlier. The S&P/Case-Shiller index showed home prices in 20 U.S. cities appreciated at a faster pace in the year ended in December, a sign that a limited supply is forcing up property values.

Greece Reforms

In Europe, finance ministers approved Greece’s package of new economic measures and paved the way for an extension to the country’s bailout agreement. The agreement came on a conference call Tuesday, according to an official involved in the talks who asked not to be named in line with policy.

Based on the provisional agreement between Greece and its official creditors on Feb. 20, the approval of the list was a condition for extending the availability of bailout funds for another four months.

Nine of 10 main groups in the S&P 500 rose, buoyed by utilities, financial and phone stocks. Health-care companies had the only loss, falling after nine straight days of gains.

Home Depot advanced 4 percent to a record after the largest U.S. home-improvement retailer reported fourth-quarter profit that topped analysts’ estimates as consumers spent more on their homes. The company’s board also approved an $18 billion stock buyback program, replacing its previous authorization, and increased the quarterly dividend.

JPMorgan Gains

JPMorgan added 2.5 percent. The largest U.S. bank plans to cut as much as $100 billion of some clients’ excess deposits in its efforts to limit capital required under a new U.S. proposal. The firm’s investment bank is reducing the size of its trading book and eliminating offsetting derivative contracts to cut its need for capital, according to an investor presentation.

Comcast Corp. gained 1.7 percent after Chief Executive Officer Brian Roberts said he still expects the proposed takeover of Time Warner Cable Inc. will close early this year, addressing the growing concerns about the prospects for regulatory approval. Time Warner rose 2.1 percent.

Coach Inc. rose 3 percent to a nine-month high after Oppenheimer Holdings Inc. analyst Anna Andreeva upgraded the company to outperform from market perform, citing improving profitability and the stabilization of its brand.

First Solar Inc. rallied 10 percent and SunPower Corp. jumped 18 percent. The two largest U.S. solar-panel manufacturers are planning a joint venture and expect to register for an initial public offering for it.

Macy’s Inc. dropped 3.2 percent after the largest department-store chain forecast lower-than-estimated annual profit after posting disappointing sales growth during the holiday season.

Micron Technology slumped 2 percent after a Korea Times report said competitor Samsung Electronics Co. had signed a deal with Apple to supply more than half of that company’s DRAM needs for iPhone 6S, according to Stifel Nicolaus & Co. Inc. analyst Kevin Cassidy.

To contact the reporter on this story: Michelle F. Davis in New York at mdavis194@bloomberg.net

To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net; Jeff Sutherland at jsutherlan13@bloomberg.net Jeff Sutherland

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