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Stocks end moderately higher, post winning week

Adam Shell
USA TODAY

Stocks posted moderate gains Friday and a winning week as Federal Reserve chair Janet Yellen said that it is “appropriate” for the Fed to “gradually and cautiously” increase interest rates “in the coming months” if the economy and labor market continue to improve.

Traders work on the floor of the New York Stock Exchange on May, 26,  2016.  (EPA/JUSTIN LANE)

The Dow Jones industrial average, which kicked off the trading session up 55 points in May, ended up 45 points on the day, a 0.3% bump. The Standard & Poor's 500 stock index rose 0.4% and the Nasdaq composite gained 0.7%.

Yellen’s comments reiterated what the Fed minutes on May 18 and commentary from other Fed members since then have been stressing: a rate hike is coming, perhaps as early as June, if the early rebound early in the second quarter continues.

The Fed had already set the stage for a rate increase last week in the minutes of its April meeting.

Wall Street was also digesting the revision in first-quarter GDP, with U.S. economic growth raised to 0.8%, better than the initial read of 0.5%, but below the market's expectations for 1% growth. Still, despite the disappointing growth in the first three months of the year, the "most recent data indicate that activity is bouncing back solidly in the second quarter," Jesse Hurwitz, an economist at Barclays, said in a research note. Barclays estimate for second quarter GDP growth is 2.5%.

Economy wasn't quite so feeble in Q1

Paul Ashworth, U.S. economist at Capital Economics, also focused on the more positive growth outlook going forward. "The modest upward revision to first-quarter GDP ... is nothing to worry about when the most recent incoming data point to a big pick-up in second-quarter growth," he wrote in a report.

U.S.-produced crude, which on Thursday briefly topped $50 per barrel for the first time since October, was in retreat Friday, falling 22 cents to $49.26. A nearly 0.3% rise in the value of the U.S. dollar versus foreign currencies is weighing on commodities.

Barring any major policy surprises from Yellen on rates, trading is expected to be quiet ahead of the three-day weekend, as it was on Thursday.

David Rosenberg, chief economist and strategist at Gluskin Sheff, expected a "snoozer of a trading day."

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