NEW YORK (AP) — Investors liked the steady tone from the new Federal Reserve chief yesterday.
Stocks rose sharply in the afternoon as Janet Yellen said she would continue the central bank's low-interest rate policy. The remarks were her first public comments since taking the job last week.
Investors also welcomed news that Congress appeared poised to raise the U.S. borrowing limit without the political drama that happened late last year. That would avert the threat of a default on government debt.
KEEPING SCORE: The Dow Jones industrial average rose 206 points, or 1.3 percent, to 16,008 as of 2:53 p.m. Eastern time. The Standard & Poor's 500 index rose 20 points, or 1.3 percent, to 1,820 and the Nasdaq composite rose 45 points, or 1.1 percent, to 4,193. The Nasdaq's rise on Tuesday put the index in positive territory for 2014. The Dow and S&P 500 are still down 3.5 percent and 1.5 percent this year, respectively.
CONTINUITY AT THE FED: Yellen told Congress she expects a "great deal of continuity" with her predecessor, Ben Bernanke. She said she supports his view that the economy is strengthening enough to withstand a pullback in the Fed's stimulus, but that interest rates should stay low to encourage more growth. Last week, the Fed announced it would reduce its bond purchases by $10 billion to $65 billion a month.
"She's being well received (by investors)," said Rob Stein, CEO of Astor Investment Management in Chicago.
DEBT CEILING: House Speaker John Boehner said Tuesday that he would allow a vote to raise the nation's borrowing limit without any conditions attached. Treasury Secretary Jack Lew, in a letter to Boehner last week, said the federal government would exhaust its ability to borrow by Feb. 27. Lew urged Congress to pass a debt ceiling bill as soon as possible. Investors worried that more political wrangling over raising the borrowing limit could disrupt financial markets, like in October 2013 and August 2011.
"Investors were worried the debt ceiling debate was going to end in disaster," said Brian Reynolds, chief market strategist at Rosenblatt Securities. "But that doesn't appear to be the case anymore."
CVS RISES: Drugstore and pharmacy benefits company CVS Caremark rose $1.82, or 3 percent, to $68.76 after the company reported an increase in fourth-quarter earnings, beating analysts' forecasts. CVS said last week it would stop selling tobacco products, which the company expects will cost about $2 billion in sales and will cut its earnings by 6 cents to 9 cents per share.
BARCLAYS CUTS: Barclays fell 61 cents, or 3 percent, to $17.59 after the British bank, citing a slowdown in its investment banking division, said it would slash up to 12,000 employees.
SPRINT: Sprint rose 20 cents, or 3 percent, to $7.89. The third-largest U.S. wireless carrier said its quarterly loss shrank. It also said it added 477,000 wireless subscribers and its loss was less than what analysts had expected.
BOND YIELDS, GOLD RISE: With stocks rising sharply, investors sold bonds. The yield on the 10-year U.S. Treasury note rose to 2.72 percent from Monday's yield of 2.68 percent. Gold also rose after Yellen's comments, gaining $15.10, or 1 percent, to $1,289.80 an ounce.