Stocks close higher as S&P 500, Nasdaq near record highs

Stocks rose Thursday as Federal Reserve Chair Janet Yellen emphasized that the Fed is likely to raise interest rates 'relatively soon', which sent bond yields higher and gave banks a boost.

The Standard & Poor's 500 index gained 10.18 points, or 0.4%, to close at 2187.12, just 3 points short of its record closing high of 2190.15 set August 15. The Nasdaq composite index jumped 39.39, or  0.7%, to 5333.97, slightly short of its all-time closing high of 5339.52 set September. 22. The Dow Jones industrial average, which hit record highs last week, gained 35.68 points, or 0.2%, to close at 18,903.82. .

Federal Reserve Chair Janet Yellen said again that the Fed is more likely to raise interest rates soon. She testified before Congress, and in prepared remarks, Yellen sketched a picture of an improving U.S. economy. The Fed is widely expected to raise rates when it meets in mid-December. She added that if the Fed keeps waiting now and later raises rates too quickly, that increases the risk of a recession.

Bond prices slipped. The yield on the 10-year U.S. Treasury note jumped to 2.28% from 2.22%. Bond yields rise when investors expect higher interest rates.

Yellen: Trump plan may stoke inflation, debt

Though the election of Donald Trump as the next U.S. president has complicated the U.S. economic outlook, financial markets still think that a Fed rate hike next month is far more likely than not. What’s more interesting to markets is when the ensuing rate hike will be and it’s here that Trump’s victory could impact. Trump has promised to cut taxes and raise infrastructure spending, measures that could boost economic growth and potentially spur inflation. That’s seen a rally in stocks, a sell-off of U.S. bond yields and a concurrent rise in the dollar.

“With chances of a rate hike now at 94 percent for December, there is a risk that the Fed’s leader could spark a bout of dollar weakness if she so much as hints at the possibility that the central bank won’t move in December,” said Chris Beauchamp, chief market analyst at IG. “Thus currencies like the yen and the euro which have fallen hard over the past few days against the US dollar, could be due a decent bounce, with worrying consequences for equity markets in those countries.”

Oil prices fell for a second day as benchmark U.S. crude  slid 15 cents to $45.42 a barrel in electronic trading on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei was flat at 17,862.63 and Hong Kong’s Hang Seng index eased 0.1% to 22,262.88. China’s Shanghai Composite Index rose 0.1% to 3,208.45.