Wall Street records fresh highs on Yellen's rate hike views at testimony

US stocks opened higher on Wednesday after Federal Reserve Chair Janet Yellen said interest rates hikes would be gradual and will not have to rise much further to reach neutral rate.

Yellen, in a prepared testimony to be delivered to Congress at 10 a.m. ET (1400 GMT), said the economy is healthy enough to absorb further gradual rate increases and the slow wind down of the Federal Reserve's massive bond portfolio.

The testimony depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment.

Investors and some Fed officials, concerned with the recent dip in inflation, have been wanting to see a surer progress toward the central bank's goal of 2 percent inflation.

Yellen ascribed the inflation drop to "a few unusual reductions in certain categories of prices" and said it would eventually drop out of the calculation.

"I'm not very surprised by Yellen's comments. She's been pretty steadfast that we're raising rates... The market is liking the fact that she's seeing economic growth," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

"What the Fed's doing and she's doing is continuing the case for raising rates."

The U.S central bank will also issue its Beige Book at 2 p.m. ET, a compendium of anecdotes on the health of the economy. The Fed's next policy meeting is on July 25-26.

At 9:38 a.m. ET, the Dow Jones Industrial Average was up 133.61 points, or 0.62 percent, at 21,542.68, the S&P 500 was up 16.18 points, or 0.66 percent, at 2,441.71.
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