US stocks surge as Yellen says rates to stay same

US stocks rose to records after Federal Reserve Chair Janet Yellen testified that inflation and wage growth remain too low for the central bank to raise rates before mid-year. Treasuries and the dollar fluctuated.

The Standard and Poor’s 500 Index rose 0.3 per cent to an all- time high in New York. The Dow Jones Industrial Average gained 0.5 per cent to a record. The yield on 10-year Treasuries declined two basis points to 2.04 per cent. The Stoxx Europe 600 Index advanced 0.6 percent, while the rate on 10-year bonds from Portugal and Italy fell.

Ms Yellen on Tuesday repeated that the Fed’s pledge to be “patient” on beginning to raise the benchmark interest rate means an increase is unlikely for “at least the next couple” of meetings.

Ms Yellen said the Fed will change its forward guidance before raising rates.

European equities and bonds gained after euro-region finance ministers approved the Greece’s package of new economic measures and paved the way for an extension to the country’s bailout agreement. “We have some more time where rates are not going to change dramatically over near-term,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball and Associates in Bethlehem, Pennsylvania, said .

“The market’s interpreting it as a continuation of policy until proven otherwise – going to need to see continued evidence, job growth, inflation or economic growth picking up – before they’re going to change their forward guidance.” Ms Yellen is giving her semi-annual testimony before congress after minutes from the central bank’s January meeting showed some policy makers argued for keeping rates low for longer amid risks facing the economy.

The Federal Open Market Committee pointed to a strengthening dollar, international flash points from Greece to Ukraine, and slow wage growth as weakening the case for the first rate rise since 2006.

“It is important to emphasise that a modification of the forward guidance should not be read as indicating that the committee will necessarily increase the target range in a couple of meetings,”

- Bloomberg