World stock indices on Wednesday, July 12, rallied, lifting the Dow to a record high, the dollar gained and bond yields tumbled on Wednesday after Federal Reserve Chair Janet Yellen dampened growing expectations that more than one interest rate hike was in the cards this year.
Equities rose on the view the Fed’s monetary policy is not going to be as aggressive as some had anticipated, said Larry Hatheway, chief economist at asset management firm GAM.
MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.97 percent while the pan-European FTSEurofirst 300 index of leading regional shares .FTEU3 closed 1.61 percent higher at 1,514.59 and emerging market stocks .MSCIEF rose 1.4 percent.
On Wall Street, the Dow Jones Industrial Average .DJI rose 123.07 points, or 0.57 percent, to 21,532.14, a new closing high. The S&P 500 .SPX gained 17.72 points, or 0.73 percent, to 2,443.25 and the Nasdaq Composite .IXIC added 67.87 points, or 1.1 percent, to 6,261.17.
In remarks to the House Committee on Financial Services, Yellen said the U.S. economy is strong enough to absorb further gradual rate increases along with the slow wind-down of the Fed’s massive bond portfolio.
The testimony depicted an economy that is growing, albeit slowly, and continues to add jobs as it benefits from steady household consumption and a recent jump in business investment.
Given current estimates, the federal funds rate “would not have to rise all that much further” to reach a neutral level that neither encourages nor discourages economic activity, Yellen said in her prepared testimony.
The benchmark 10-year U.S. Treasury note yield fell to 2.302 percent US10YT=RR, its lowest in two weeks, before paring some gains to trade at 2.3195.
At the front end of the curve, the two-year yield US2YT=RR dropped as low as 1.331 percent from 1.379 percent on Tuesday and last traded at 1.3470 percent.
Germany’s 10-year government bond yield fell to 0.511 percent DE10YT=TWEB, Reuters reports.
