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GLOBAL MARKETS-Wall St at record, dollar gains in wake of Yellen comments
February 14, 2017 / 7:23 PM / 8 months ago

GLOBAL MARKETS-Wall St at record, dollar gains in wake of Yellen comments

* Financials power Wall Street to record

* Yellen warns about delaying rate hike

* Dollar reverses course in wake of Yellen comments (Updates with European markets close)

By Chuck Mikolajczak

NEW YORK, Feb 14 (Reuters) - Financial stocks propelled Wall Street to a record on Tuesday and the dollar strengthened as U.S. Federal Reserve Chair Janet Yellen struck a hawkish tone on the timing of an interest rate hike.

Yellen told the U.S. Senate Banking Committee the central bank will likely need to raise interest rates at an upcoming meeting, although she expressed caution about the considerable economic policy uncertainty under the Trump administration.

Financial stocks moved higher following her remarks and were last up 1.1 percent, on track for their fourth straight advance. Utilities and real estate, which tend to weaken in a rising rate environment, were last down 0.9 percent and 0.8 percent, respectively.

The Fed signaled in December that it expected to raise rates three times in 2017.

The dollar reversed course after Yellen’s comments and was last up 0.3 percent after touching a three-week high of 101.38 against a basket of major currencies.

“People want to put money into that because they want to believe that growth will be stronger, that inflation will be more of an issue - a more normal economy, in other words,” said Paul Christopher, head market strategist for Wells Fargo Investment Institute in St. Louis.

Thomson Reuters data shows traders see a 17.7 percent chance of a 25-basis-point hike in rates at the Fed’s March meeting.

The greenback was initially under pressure following the resignation of President Donald Trump’s national security adviser, Michael Flynn, who quit over revelations he had discussed U.S. sanctions against Moscow with the Russian ambassador to the United States before Trump took office.

Yellen’s hawkish tone dovetailed with recent comments from other Fed officials.

Dallas Fed President Robert Kaplan on Monday argued the Fed should move soon to avoid falling behind the curve, especially as fiscal policy could drive faster growth and inflation. Earlier on Tuesday, Richmond Fed President Jeffrey Lacker said the central bank will likely have to raise interest rates more rapidly than financial markets currently expect.

“If they wanted to raise rates a third time and they wanted to start priming the pump or preparing the markets, especially the equity markets, now would be the time to do it,” said Christopher.

The Dow Jones Industrial Average rose 64.25 points, or 0.31 percent, to 20,476.41, the S&P 500 gained 7.03 points, or 0.30 percent, to 2,335.28 and the Nasdaq Composite added 14.26 points, or 0.25 percent, to 5,778.22.

The gains put the S&P on track for its fourth straight record close.

MSCI’s all-country world index edged up 0.01 percent, putting it on track for its first decline in five session. Europe’s broad FTSEurofirst 300 index edged down 0.04 percent to snap a five-session winning streak.

Yields on benchmark U.S. 10-year Treasury notes climbed to 2.4752 percent, down 12/32 in price, after hitting a high of 2.502 percent.

Oil pared gains on Tuesday as concerns about rising supply from U.S. shale output overshadowed an OPEC-led effort to cut global output, which has supported oil prices in a higher range. Brent crude was last up 0.9 percent at $56.07 and U.S. crude was up 0.6 percent at $53.26 a barrel.

Additional reporting by Richard Leong; Editing by Dan Grebler and Nick Zieminski

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