Investing.com – With no major economic data stateside on Tuesday, Wall Street traded slightly higher as market participants continued to contemplate the risk associated with the U.K.’s June 23 referendum on its membership in the European Union (EU) and while Federal Reserve (Fed) chair Janet Yellen continued to show a dovish stance in her semi-annual testimony.
At 16:27GMT or 12:27ET, the Dow 30 rose 37 points, or 0.21%, the S&P 500 traded up 6 points, or 0.29%, while the tech-heavy NASDAQ Composite advanced 5 points, or 0.10%.
U.S. markets continued keeping a close eye on developments regarding the possibility of a Brexit, as a vote to leave in the U.K.’s June 23 referendum on EU membership is known.
Online betting service Betfair showed on Tuesday that there was a 75% chance the British public would vote to stay in the EU.
Opinion polls published in the U.K. continued to mostly show the vote to remain in the lead and the pound showed strength in early European trade on Tuesday, hitting its highest level since before the EU referendum date was announced.
However, in early U.S. trade, investors appeared to change their minds, with GBP/USD entering negative territory as a Survation poll appeared to remind traders that both sides where neck and neck.
Indeed, JP Morgan did warn that the race was too close to call, so market participants may have decided to take risk off the table with only two days to go before the vote.
Stateside, Yellen appeared before the Senate Banking Committee and insisted on the fact that the Fed still anticipated a gradual increase in rate hikes, but admitted that “considerable uncertainty about the economic outlook remains.”
She noted to her concern about the recent weak employment reading, pace of investment and low productivity growth, although the May jobs report was expected to be “transitory”.
With regard to external risks, Yellen once again referenced the Brexit referendum and reiterated that “a U.K. vote to exit the European Union could have significant economic repercussions.”
The Fed chief also mentioned China’s rebalancing among the primary risks to the global economic outlook, precisely on a day in which the People's Bank of China (PBOC) admitted that the country’s economy continued to face a relatively large downward pressure.
Despite repeating the Fed’s outlook for a gradual increase in interest rates, Yellen’s speech appeared to be slightly more dovish, as it more clearly left the door open interest rate cuts.
While insisting that U.S. monetary policy was data dependent and stronger readings could imply a more rapid tightening path, she also added the possibility of the opposite situation.
“Conversely, if the economy were to disappoint, a lower path of the federal funds rate would be appropriate,” Yellen said.
The possibility of a rate cut was not mentioned in the June 15 statement, while the Yellen’s only mentioned the idea once during the press conference:
“Maintaining our sizable holdings of longer term securities should help maintain accommodative financial conditions and should reduce the risk that we might have to lower the federal funds rate to zero in the event of a future large adverse shock,” she stated.
In Tuesday’s testimony, Yellen did not clarify what would be considered a disappointment.
In any case, the Fed chair will repeat her same speech to the House of Representatives' Committee on Financial Services on Wednesday, though market players will pay attention to the question and answer period to see if Yellen reveals any further details in her testimony.
Furthermore, Fed governor Jerome Powell was scheduled to deliver a speech on Tuesday at 18:30GMT, or 14:30ET.
Meanwhile, crude fell for the first time in three days as market players looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles fell by 1.9 million barrels in the week ended June 17.
U.S. crude futures fell 1.58% to $49:17 a barrel by 16:27GMT or 12:27ET, while Brent oil lost 1.50% to $49.89.
In company news, CarMax Inc (NYSE:KMX) fell nearly 4% after reporting first quarter earnings per share and revenue that missed consensus while Lennar (NYSE:LEN) traded flat despite a better than expected report.
FedEx, Adobe or KB Home will release numbers after the close.
Also of note, Facebook (NASDAQ:FB) shareholders gave the green light to create a new class of non-voting shares that would essentially imply a 3 for 1 stock split in a move designed to allow chief executive Mark Zuckerberg to donate his shares without losing control of the social media company.