U.S. Stocks Advance as Fed's Yellen Reassures on Growth Risks

U.S. Stocks Advance as Fed's Yellen Reassures on Growth Risks


U.S. stocks advanced as Federal Reserve Chair Janet Yellen reassured investors that U.S. economic growth is sturdy enough to withstand turmoil in emerging markets.
Nike Inc. led the early rally, jumping 9.4 percent to a record after better-than-forecast earnings and future orders, including in emerging markets. Citigroup Inc. and Bank of America Corp. gained more than 1.7 percent as financial companies rose with bond yields. Health-care lagged as Aetna Inc. and Anthem Inc. slipped at least 1.6 percent. 
The Standard & Poor’s 500 Index climbed 0.6 percent to 1,943.66 at 10:29 a.m. in New York, after after closing Thursday at an almost three-week low. The Dow Jones Industrial Average gained 162.65 points, or 1 percent, to 16,363.97. The Nasdaq Composite Index added 0.3 percent.
“You had a rally starting mid-day yesterday, and last night Yellen provided more clarity from what we had a week ago,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “The fact that the market had sold off five of the last six days meant a lot of negativity was priced in short-term, and the whiff of anything positive was going to push the market higher. We were due to go up on something today.”
Speaking after markets closed yesterday, Yellen said the central bank is on course to raise interest rates this year, although she acknowledged that economic “surprises” could lead them to change that plan. 
The Fed held its fire on a rate increase last Thursday, saying it’s considering spillover risks to the U.S. economy from turmoil in global markets. That sparked declines in U.S. equities in five out of six sessions leading up to Yellen’s speech. The selloff was briefly interrupted on Monday when Fed officials said a 2015 increase is still warranted. Traders are split on whether it will happen, pricing in about a 43 percent chance of a hike in December and a roughly 51 percent probability of liftoff in January.
The S&P 500 is down 0.8 percent this week, and headed for the first back-to-back weekly drop since July. The benchmark has lost 5.8 percent in the third quarter, on its way to its first consecutive quarterly declines since 2011, with equities pressured as China’s slowdown weighed on sentiment.
The Chicago Board Options Exchange Volatility Index has closed above 20 for 24 straight sessions, the longest stretch since June 2012. The measure of market turbulence known as the VIX fell 5.8 percent Friday to 22.11.
Further soothing some of investors’ worries about the impact of an emerging-market downturn, data today showed the world’s largest economy expanded more than previously forecast in the second quarter, up 3.9 percent at an annualized rate. Growth was boosted by gains in consumer spending and construction that may help the U.S. withstand a global slowdown.

A separate report showed the University of Michigan’s consumer sentiment final index for the month decreased to 87.2, the lowest level since October, from 91.9 in August. Economists surveyed by Bloomberg called for a reading 86.5, compared with a preliminary September reading of 85.7.