NEW YORK (REUTERS) - US stocks opened higher on Wednesday after Federal Reserve Chair Janet Yellen said interest rates hikes would be gradual and will not have to rise much further to reach neutral rate.
Ms Yellen, in a prepared testimony to be delivered to Congress at 10 a.m. ET (10:00 p.m Singapore time), said the economy is healthy enough to absorb further gradual rate increases and the slow wind down of the Federal Reserve's massive bond portfolio.
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 per cent inflation.
Ms Yellen ascribed the inflation drop to "a few unusual reductions in certain categories of prices" and said it would eventually drop out of the calculation. "I'm not very surprised by Ms Yellen's comments. She's been pretty steadfast that we're raising rates... The market is liking the fact that she's seeing economic growth," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
"What the Fed's doing and she's doing is continuing the case for raising rates."
At 9:38 a.m. ET, the Dow Jones Industrial Average was up 133.61 points, or 0.62 per cent, at 21,542.68, the S&P 500 was up 16.18 points, or 0.66 per cent, at 2,441.71. The Nasdaq Composite was up 49.85 points, or 0.8 per cent, at 6,243.16. Ten of the 11 major S&P 500 sectors were higher, with the energy index's 0.97 per cent rise leading the advancers.
The financial index was the only laggard and fell 0.15 percent.
Investors will also be keeping an eye on second-quarter earnings reports on Friday from big US banks including JPMorgan Chase, Wells Fargo and Citigroup.