Investing.com – Wall Street traded higher on Thursday as equities digested data and a warning from Federal Reserve (Fed) chair Janet Yellen indicating the danger of keeping rates low for “too long” and said that the central bank had already considered that the time for a rate hike would be “relatively soon”, sending the dollar to fresh 14-year highs and briefly pushing odds for a December hike to 95%.
At 12:34PM ET (17:34GMT), the Dow Jones gained 21 points, or 0.11%, the S&P 500 rose 12 points, or 0.55% while the tech-heavy Nasdaq Composite traded up 38 points, or 0.80%.
In her prepared remarks to the U.S. Congress Joint Economic Committee, Yellen indicated that the general feeling of the Fed officials at the November 2 policy meeting was that an increase in rates could “become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee's objectives.”
She herself further warned that there were dangers in waiting "too long" before proceeding with the removal of accommodative monetary policy.
“Were the FOMC to delay increases in the federal funds rate for too long, it could end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of the Committee's longer-run policy goals,” she warned.
She did however follow up with reiterating her belief that future rate hikes would “gradual” and insisted that “the economic outlook is inherently uncertain, and, as always, the appropriate path for the federal funds rate will change in response to changes to the outlook and associated risks.”
Having avoided any direct comments in her speech on the effect of the election of Donald Trump to the U.S. presidency on monetary policy, Yellen faced the issue in questions from Congress.
She explained that there will be many economic policies which Congress and the administration will consider in the coming months.
“When there is greater clarity, the (Fed) will have to factor (that into) their assessments and perhaps adjust the outlook depending on what happens,” Yellen said.
In response to a direct question, Yellen also confirmed that she fully intended to serve out her full term up to February 2018. As a reminder, there had been some speculation that critiques from Trump could make Yellen decide to resign before the end of her term as Fed chair.
In another Fed appearance on Thursday, William Dudley, head of the New York Fed and voting member, made no remarks on monetary policy.
Fed governor Lael Brainard and Chicago Fed president Charles Evans were also scheduled for appearances later in the day.
On the economic data front, annual headline inflation ticked up to a two-year high, coming out in line with consensus, though the core readings on both a month-on-month and annualized basis eased unexpectedly.
In the labor market, initial jobless claims in the week ending November 12 fell by 19,000 to 235,000, beating expectations for an increase to 257,000 and hitting the lowest level since 1973.
Separately, the Commerce Department said housing starts surged 25% in October to hit 1.323 million units, a nine-year high, while building permits rose 0.3% to 1.229 million units.
After the slew of data and remarks by Yellen, odds for a rate hike in December jumped briefly to 95.4%, from 85.8% the day before. They later eased and last stood at 90.6%, according to Investing.com's Fed Rate Monitor Tool.
The dollar index jumped to fresh 14-year highs at 100.70. It was last up 0.31% at 100.69 by 12:38PM ET (17:38GMT).
In big moves on earnings, Wal-Mart (NYSE:WMT) was down nearly 4% after falling food prices and warm weather hit sales at the world’s largest retailer.
On the upside, shares in Best Buy (NYSE:BBY jumped more than 10% after same-store sales beat expectations.
Applied Materials (NASDAQ:AMAT) and Gap (NYSE:GPS) were some of the firms to publish after the close.
Meanwhile, oil prices were on the rise Thursday as OPEC ministers commented over a possible deal on output.
Saudi Energy Minister Khalid al-Falih showed optimism on Thursday that OPEC would formalize a preliminary oil output deal reached in Algeria in September.
“I’m still optimistic that the consensus reached in Algeria for capping production will translate, God willing, into caps on states’ levels and fair and balanced cuts among countries,” he told Saudi-owned Al-Arabiya TV.
Similarly, Algerian energy minister Noureddine Boutarfa insisted that OPEC was closing in on a consensus for a 6-month output deal.
U.S. crude futures gained 0.46% to $45.78 by 12:41PM ET (17:41GMT), while Brent oil traded up 0.43% to $46.84.