THE DOW and the S&P 500 index ended at new highs last night after comments from Janet Yellen, the US Federal Reserve chair nominee, suggested the Fed’s accommodative policies would continue as long as the economy remains fragile.
Gains in the technology-heavy Nasdaq and the Dow were held back by Cisco Systems, however, after the networking giant reported disappointing results on Wednesday. Cisco shares fell as much as 13 per cent yesterday.
Yellen’s Q&A followed late gains in the market on Wednesday ahead of the release of her prepared remarks. In her testimony, Yellen said the Fed’s current $85bn in monthly bond purchases “cannot continue forever,” but dismissed the notion current prices suggest bubble-like conditions.
“Her hearing confirmed the suspicion that she will be slightly more dovish Bernanke,” said Joseph Tanious, Global Market Strategist at JP Morgan Funds.
“It reassured investors that they are unlikely to see any tapering announced this year.”
The Dow Jones industrial average was up 54.59 points, or 0.35 per cent, at 15,876.22. The Standard & Poor’s 500 Index was up 8.62 points, or 0.48 per cent, at 1,790.62. The Nasdaq Composite Index was up 7.17 points, or 0.18 per cent, at 3,972.74.
Since the beginning of the year, the S&P has gained about 25 per cent and the Dow 21 per cent, thanks in part to the Fed’s massive bond-buying stimulus.
The benchmark S&P 500 index is trading at about 16 times projected earnings.