Benchmarks hit record highs on Tuesday after Janet Yellen made her semiannual testimony before the Senate Banking Committee. Markets interpreted her dovish comments as reassurance that rate hike may only come in the latter half of the year. Moreover, gains in Home Depot, First Solar and Toll Brothers also boosted markets. The Dow reached a record high for second time this year, while the S&P 500 hit its record mark for the fourth time. The Nasdaq finished in positive territory for the tenth-consecutive session, registering its longest stretch in the green since Jul 2009.
For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) gained 0.5% to close at 18,209.19. The Standard & Poor 500 (S&P 500) rose 0.3% to 2,115.48. The tech-laden Nasdaq Composite Index closed at 4,968.12; increasing more than 0.1%. The fear-gauge CBOE Volatility Index (VIX) declined 6% to settle at 13.69. A total of about 5.9 billion shares were traded on Tuesday, below month-to-date average of 6.9 billion. Advancers outpaced declining stocks on the NYSE. For 60% stocks that advanced, 37% declined.
On Tuesday, Federal Reserve chairwoman Janet Yellen said in her Congressional testimony that the Fed will decide on a rate hike “on a meeting-by-meeting basis.” She also reconfirmed that the Fed will evaluate economic conditions before considering a rate hike. Additionally, Yellen stated that dropping the word “patient” from the Federal Open Market Committee’s (FOMC) statements does not imply that the Fed will raise interest rate immediately.
Yellen said: “If economic conditions continue to improve, as the committee anticipates, the committee will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis.” She added: “However, it is important to emphasize that a modification of the forward guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings.” Yellen will conclude her two-day Congressional testimony today.
Separately, First Solar, Inc.’s (FSLR – Analyst Report) shares surged 10.2% after announcing a partnership with its main competitor, SunPower Corporation (SPWR – Analyst Report). First Solar and SunPower will be forming a yieldco, a publicly traded subsidiary that essentially makes it easier for renewable energy companies to raise funds for new projects. Shares of SunPower jumped 18%. First Solar was the best performer among the S&P 500 companies.
On the earnings front, shares of The Home Depot, Inc. (HD – Analyst Report) gained 4% after announcing fourth quarter adjusted earnings per share of $1.00, beating the Zacks Consensus Estimate of 89 cents. Moreover, net sales advanced 8.3% to $19,162 million from $17,696 million in the year-ago quarter, beating the Zacks Consensus Estimate of $18,672 million. Home Depot’s strong earnings results boosted the blue chip index yesterday.
Additionally, Toll Brothers Inc.’s (TOL – Analyst Report) shares rose 3.9% after declaring first quarter 2015 earnings per share of 44 cents, outpacing the Zacks Consensus Estimate of 30 cents. Quarterly earnings per share increased 76% year over year.
Moreover, the S&P/Case Shiller composite index of 20 metropolitan cities rose 4.5% year on year in December, higher than 4.3% gain in November. Encouraging earnings results from Toll Brothers and improvement in the S&P/Case Shiller composite index had a positive impact on the SPDR S&P Homebuilders (XHB). The sector gained 1.2% and was biggest gainer among the S&P 500 sectors.
Key housing stocks including PulteGroup, Inc. (PHM – Analyst Report), Lennar Corp. (LEN – Analyst Report), KB Home (KBH – Analyst Report) and DR Horton Inc. (DHI – Analyst Report) rose 2.9%, 2.8%, 3.9% and 1.8%, respectively. Nine out of 10 S&P 500 sectors registered gains on Tuesday.
Meanwhile, Markit’s flash PMI for the U.S. services sector increased from 54.2 in January to 57.0 in February, reaching its highest level since October. The reading indicates that the sector experienced a rapid growth in February. However, the Conference Board reported that Consumer Confidence Index declined to 96.4 in February from January’s reading of 103.8, missing the consensus estimate of 100.7.