US open: Stocks smidgen higher as investors digest Yellen testimony

US stocks were trading just a touch higher on Tuesday as investors digested the latest comments from Federal Reserve Chair Janet Yellen and kept an eye on any Brexit-related developments.

At 1530 BST, the Dow Jones Industrial Average and the Nasdaq were up 0.1% while the S&P 500 was 0.2% firmer.

At the same time, oil prices fell back. West Texas Intermediate and Brent crude were down 2.1% at $48.36 and $49.61 a barrel, respectively.

Stocks in Europe and the US racked up healthy gains on Monday as investors welcomed polls showing a swing in favour of the Remain camp in the EU referendum.

On Tuesday, market participants reacted to an ORB poll for the Daily Telegraph which put the Remain campaign in the lead by seven points, and a YouGov poll for the Times giving the Leave camp a two-point lead.

In addition, a phone poll by Survation for IG showed the Remain vote stayed at 45% compared to 44% leave, up two percentage points as the share of undecided voters shrank to 1%.

Aside from the UK referendum, the focus was on Yellen’s semi-annual testimony before the Senate Banking Committee.

Yellen said on Tuesday that the Fed would take a cautious approach to hiking interest rates, closely monitoring financial developments.

She said she sees “considerable uncertainty” over the US economic outlook, also highlighting the potential impact of the UK referendum.

“In the current environment of sluggish growth, low inflation, and already very accommodative monetary policy in many advanced economies, investor perceptions of and appetite for risk can change abruptly,” Yellen said. “One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A UK vote to exit the European Union could have significant economic repercussions.”

She added: ““Proceeding cautiously in raising the federal funds rate will allow us to keep the monetary support to economic growth in place while we assess whether growth is returning to a moderate pace, whether the labour market will strengthen further, and whether inflation will continue to make progress toward our 2% objective.”

Overall, the testimony contained nothing new in terms of hints on the timing of the next rate hike, largely repeating what Yellen said in the post-rate announcement press conference.

Pantheon Macroeconomics said the testimony was “more of the same, mostly, but an acknowledgment that they can’t be certain inflation will rise”.

Chief economist Ian Shepherdson said: “We still think September is the best bet for now, but we’re persuadable that payrolls might not rebound quickly enough to allow them to act until December. And if the UK votes for Brexit, all bets are off.”

In corporate news, software company Sabre Corp was in the red after saying chief executive Tom Klein will resign.

Elsewhere, Facebook shares were higher after its executives reiterated their interest in entering China.

Housebuilder Lennar Corp rose after it reported a better-than-expected quarterly profit, but car seller CarMax slumped as its first-quarter earnings missed expectations.