Federal Reserve Chair Janet Yellen's soothing words on interest rates, reiterating that they would probably climb only gradually, were music to Wall Street's ears.
The S&P 500 added 0.88% and the Dow Jones Industrial Average gained 0.56%, both closing at year-to-date highs. The S&P moved back into positive territory for the year, and the Nasdaq climbed 1.7%.
The central bank's monetary policy committee should "proceed cautiously" in adjusting interest rates, Yellen said Tuesday during a speech in New York. While the labor market and consumer spending are improving, "manufacturing and net exports have continued to be hard hit by slow global growth and the significant appreciation of the dollar since 2014," she noted. Other risks include a slowing Chinese economy and oil prices still well below their 2014 peak.
At its March meeting, the Fed downgraded its policy forecast to two rate hikes this year from four. Recent comments from monetary policy committee members such as St. Louis Fed President James Bullard, however, suggest that an April rate hike isn't off the table. The odds of an April rate hike climbed to 14% from 7% following Bullard's comments, according to CME's FedWatch futures.
Yellen "does continue to be dovish," Paul Springmeyer, regional investment strategist at the Private Client Reserve at U.S. Bank, told TheStreet. "She's been very consistent in that regard... [The Fed] has been quite transparent about what they've been doing, so the markets have reacted positively to that just because there have really been very few surprises."
The tech sector was the best performer on markets Tuesday, leading the Nasdaq in its rally. Tech giants such as Alphabet (GOOGL) , Microsoft (MSFT) , Facebook (FB) and Alibaba (BABA) were higher, while the Technology Select Sector SPDR ETF (XLK) added 1.6%.