US close: Markets take possibility of Fed rate hike in their stride

Wall Street advanced at the end of the week, with traders apparently taking slightly hawkish remarks from the head of the US central bank in their stride.

The Dow Jones Industrial Average advanced 0.25% or 44.93 points to 17,873.22, the S&P 500 gained 0.43% or 8.96 points to end the day at 2,099.06 and the Nasdaq Composite tacked on 0.65% or 31.74 points to finish at 4,933.50.

Speaking at Harvard University, Federal Reserve chair Janet Yellen seemed to leave the door open to the possibility of a second interest rate hike "in coming months".

That saw the US dollar index gain 0.37% to 95.521 and pushed the policy-sensitive two-year US Treasury note yield up by a significant four basis points to 0.91%, capping a third consecutive week of rises. Commodity markets proved resilient to the rise in the greenback, with the Bloomberg Commodity index ending the sesison up by 0.13% at 85.47.

The benchmark S&P 500 ended the week 2.3% higher - boosted by financial and technology issues - and to less than within 2% of its historic highs.

The Commerce Department’s second estimate of first quarter US gross domestic product was for a 0.8% rise at a seasonally-adjusted rate, up from the initial estimate of 0.5% but a touch below expectations of 0.9%.

Meanwhile, consumer spending was up 1.9%, in line with the initial estimate and outlays on new home construction rose at a rate of 17.1% compared to an initial estimate of 14.8%.

Pantheon Macroeconomics said: “Overall, these data don't materially change our view that second quarter growth will be 3% or better, and they don't fix the very long running statistical problem which tends to depress first quarter GDP growth relative to the trend.

"This, presumably, is why the April FOMC minutes showed that "most" participants believed growth "had likely not deteriorated as much as was suggested by the recent data on spending and production". In other words, when they said they wanted to see evidence of a rebound in Q2, they were pretty sure they would get it.”

In an interview with professor Gregory Mankiw at Harvard University, Yellen said it was "appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time,” and then went on to add “and probably in the coming months such a move would be appropriate.”

Front month crude oil futures edged higher ahead of the upcoming OPEC summit. West Texas Intermediate closed up by 2 cents to $49.33 per barrel on the NYMEX.

In corporate news, Ulta Salon Cosmetics & Fragrance jumped after releasing better-than-expected first-quarter results.

Valeant Pharmaceuticals was also on the front foot after saying it had rejected a takeover approach from Takeda Pharmaceutical and TPG.

From a sector stand-point, the best performance was put in by: Recreational services (2.0%), Gambling (1.69%) and Tires (1.54%).

In a potentially positive signs for markets and the economy, corporate bond sales worldwide were on track for a bumper month, with more than $236bn in deals having been announced, according to Bloomberg.

The yield on the benchmark 10-year US Treasury note rose two basis points to 1.85%.

By the closing bell on Friday, traders were only assigning a 28% probability to a 25 basis point interest rate hike by the time of the 15 June meeting of the Federal Open Market Committee. However, the chance of such an increase by the time of the July FOMC stood at 61%.

S&P 500 - Risers

Hewlett Packard Enterprise (HPE) $18.26 +5.00%
Viacom Inc. Class B (VIAB) $44.24 +4.02%
Macy's Inc. (M) $32.72 +3.64%
NRG Energy Inc. (NRG) $16.19 +3.45%
Williams Companies Inc. (WMB) $21.48 +3.22%
Royal Caribbean Cr (RCL) $77.77 +3.06%
Micron Technology Inc. (MU) $12.31 +3.01%
Applied Materials Inc. (AMAT) $24.44 +2.99%
Csra Inc. (CSRA) $24.88 +2.94%
Yahoo! Inc. (YHOO) $37.82 +2.88%

S&P 500 - Fallers
CF Industries Holdings Inc. (CF) $27.70 -4.35%
GameStop Corp. (GME) $28.80 -3.94%
United States Steel Corp. (X) $14.38 -2.51%
Marathon Oil Corp. (MRO) $12.90 -2.05%
Freeport-McMoRan Inc (FCX) $11.14 -1.76%
Mosaic Company (MOS) $25.69 -1.68%
Alcoa Inc. (AA) $9.35 -1.68%
Chesapeake Energy Corp. (CHK) $4.16 -1.65%
Newmont Mining Corp. (NEM) $31.96 -1.51%
Whole Foods Market Inc. (WFM) $32.03 -1.48%

Dow Jones I.A - Risers
Verizon Communications Inc. (VZ) $50.62 +0.92%
Visa Inc. (V) $79.66 +0.84%
Microsoft Corp. (MSFT) $52.32 +0.83%
Unitedhealth Group Inc. (UNH) $134.00 +0.77%
Nike Inc. (NKE) $56.19 +0.63%
JP Morgan Chase & Co. (JPM) $65.43 +0.62%
Pfizer Inc. (PFE) $34.61 +0.52%
Chevron Corp. (CVX) $102.02 +0.51%
Travelers Company Inc. (TRV) $114.18 +0.51%
Walt Disney Co. (DIS) $100.29 +0.48%

Dow Jones I.A - Fallers
McDonald's Corp. (MCD) $123.25 -0.44%
Caterpillar Inc. (CAT) $71.96 -0.17%
Wal-Mart Stores Inc. (WMT) $70.75 -0.14%
Home Depot Inc. (HD) $133.94 -0.08%
Boeing Co. (BA) $129.22 -0.07%
Apple Inc. (AAPL) $100.35 -0.06%
3M Co. (MMM) $168.89 -0.01%

Nasdaq 100 - Risers
Ulta Salon, Cosmetics & Fragrance Inc. (ULTA) $233.15 +9.11%
JD.com, Inc. (JD) $24.25 +4.66%
Baidu Inc. (BIDU) $185.01 +4.13%
Viacom Inc. Class B (VIAB) $44.24 +4.02%
Incyte Corp. (INCY) $84.53 +3.36%
Micron Technology Inc. (MU) $12.31 +3.01%
Applied Materials Inc. (AMAT) $24.44 +2.99%
Yahoo! Inc. (YHOO) $37.82 +2.88%
Norwegian Cruise Line Holdings Ltd. - Ordinary Shares (NCLH) $47.09 +2.86%
Ctrip.Com International Ltd. Ads (CTRP) $45.90 +2.73%

Nasdaq 100 - Fallers
Check Point Software Technologies Ltd. (CHKP) $83.60 -2.58%
Whole Foods Market Inc. (WFM) $32.03 -1.48%
Tesla Motors Inc (TSLA) $223.04 -0.92%
QUALCOMM Inc. (QCOM) $55.27 -0.84%
Stericycle Inc. (SRCL) $97.57 -0.78%
Sirius XM Holdings Inc (SIRI) $3.96 -0.50%
Costco Wholesale Corp. (COST) $149.08 -0.42%
Amazon.Com Inc. (AMZN) $712.24 -0.37%
Starbucks Corp. (SBUX) $55.15 -0.25%
Symantec Corp. (SYMC) $17.15 -0.23%