Stocks rose on Friday afternoon after Federal Reserve Chair Janet Yellen touted the benefits of running a "high-pressure economy."
The S&P 500 was up 0.25%, the Dow Jones Industrial Average rose 0.45%, and the Nasdaq added 0.13%.
A post-financial crisis economy means the central bank should reevaluate its traditional models for economic analysis, particularly inflation, Yellen said in comments to a Boston Fed conference on Friday afternoon. Yellen noted the measure of supply-driven output as a sign of economic success was in need of revision.
It needs to be asked "whether it might be possible to reverse these adverse supply-side effects by temporarily running a 'high-pressure economy,' with robust aggregate demand and a tight labor market," Yellen said.
The Fed may have to raise rates faster than current projections indicate, Boston Fed Eric Rosengren said earlier on Friday.
"My own view is that if the unemployment rate falls as much as I'm expecting, then it is possible that we'll have to raise rates faster than the summary of economic projections," Rosengren, a hawkish member of the Federal Open Market Committee, told CNBC.
Rosengren anticipated the unemployment rate to decline to 4.5% next year, an unsustainable level that may force the Fed to act. Current projections put interest rates at just above 1% by the end of next year. Another rate hike at the December meeting is widely expected.
A rally in big banking stocks JPMorgan (JPM - Get Report) , Citigroup (C - Get Report) and Wells Fargo (WFC - Get Report) came to an end. The big banks kicked off the earnings season for the financials sector. Financials endured a rocky quarter in the wake of the Brexit decision in late June which caused market turmoil. Banks have also had to weather an environment of low interest rates with a cautious Federal Reserve holding its monetary policy at crises levels. JPMorgan, Citigroup and Wells Fargo initially rallied after clearing low expectations.
JPMorgan was up slightly after reporting a 7.6% drop in third-quarter profit. A volatile market and a low interest-rate environment depressed the bottom line. Per-share earnings of $1.58 fell a dime from a year earlier, but beat estimates of $1.39 a share. The largest U.S. bank by assets also reported a 8.4% increase in revenue to $25.51 billion, exceeding forecasts of $24 billion.
Citigroup rose 0.6% after it exceeded analysts' estimates on its top- and bottom-lines in its third quarter thanks to a 35% increase in bond trading. The bank earned $1.24 a share, 8 cents above forecasts. Revenue slid 4% to $17.76 billion, edging past estimates by $420 million.
Wells Fargo reported a better-than-expected third quarter. The bank, which has recently been embroiled in a sales scandal, earned $1.03 a share over its recent quarter. Analysts had anticipated earnings of $1.01 a share. Revenue climbed nearly 2% to $22.3 billion, narrowly beating forecasts by $80 million. The stock fell 0.5%.
Consumer sentiment dropped unexpectedly in October as worries over the presidential election reached a peak. The index fell to 87.9 in early October, its second-lowest level in two years, from 91.2 in September, according to the University of Michigan. Consumer expectations fell to a two-year low of 76.6.
Retail sales in the U.S. climbed 0.6% in September, a sign the consumer sector remains a strong point in the U.S. economy. Analysts had expected a slightly stronger increase of 0.7%. The measure rebounded from a slight decline in August. Excluding gas and autos, sales rose 0.3%, as expected, after a flat reading in August.
Sales at electronics and appliance stores fell 0.9% month over month in September, according to the retail sales data, a figure that spooked Best Buy (BBY - Get Report) investors. Sales fell 3.8% from the year-ago period. Analysts expected to see a boost in electronics spending after the September release of the iPhone 7. Best Buy shares fell 1% on Friday.
"Consumers were still engaged in the economy during the third quarter but they were not as strong as the pace shown during the second quarter of the year," said Eugenio J. Aleman, senior economist at Wells Fargo. "Still, consumer demand remains in the driver's seat of U.S. economic performance."
Crude oil prices fell on Friday afternoon after the number of active oil-drilling rigs in the U.S. rose over the past week. The number of active oil rigs in the U.S. climbed 4 to 432, according to Baker Hughes data.
West Texas Intermediate crude was down 0.7% to $50.10 a barrel.
Business inventories in the U.S. in August rose slightly, the Census Bureau reported on Friday. The measure increased 0.2% to $1,816.9 billion, double the expected increase analysts had expected.
Producer prices in the U.S. rose in September at a faster pace than expected. The Bureau of Labor Statistics reported a 0.3% increase in prices in September, above 0.2% expected and a flat reading in August. Core producer prices rose 0.1%, in line with estimates.
Wall Street clawed back from a heavy selloff on Thursday to settle modestly lower after worries over China's economic growth faded and crude oil regained a level above $50 a barrel. Weak imports data from China had triggered worries over growth in the second-largest economy.
Salesforce.com (CRM - Get Report) jumped more than 5% in the afternoon session on reports it had lost interest in a potential acquisition of Twitter (TWTR - Get Report) . Salesforce had been rumored to be the front-runner to a purchase. Twitter fell 6.4%.
HP (HPQ - Get Report) slid 2% after issuing a weak forecast and detailing plans to cut between 3,000 and 4,000 jobs over the next three years. The company said it expects free cash flow of $2.3 billion to $2.6 billion over its fiscal year ending October 2017, below estimates of at least $2.76 billion. HP said it continued to face weakness in the printer and personal computer markets.
Hershey (HSY - Get Report) was on watch after CEO John Bilbrey announced plans to retire next summer. The board has set up a special committee to find a replacement when Bilbrey cedes the position on July 1, 2017.
Viacom (VIAB - Get Report) hired financial advisers to assess a potential merger with CBS (CBS - Get Report) . The media company said it would not speak on the matter further "unless and until it determines that additional disclosure is appropriate." Sumner Redstone's National Amusements pushed for the two companies to explore a merger two weeks ago.
Conagra (CAG - Get Report) was upgraded to outperform with a $54 price target at RBC Capital. The firm said Conagra is trading at a discount to its peers and can expand gross margin in the coming quarters.