US open: Stocks rally on Yellen's comments

LONDON (ShareCast) - (ShareCast News) - US equity markets rallied on Friday, after Federal Reserve chairwoman Janet Yellen said the economy was strengthening and a rate hike was likely this year. Shortly before 1500 BST, the Dow Jones Industrial Average was up 189 points to 16,390.33 while the S&P 500 and the Nasdaq (NasdaqGS: NDAQ - news) gained 13 and 33 points respectively.

Late on Thursday, Yellen said the US central bank will start raising interest rates in the coming months, indicating inflation pressures will gradually increase over the next couple of years.

"The Fed chair appeared to provide a bit of much needed clarity, claiming that he majority of the Federal Open Market Committee, including Yellen, expect a 2015 lift-off," said Spreadex's financial analyst Connor Campbell.

"This leaves the announcement of a rate-hike in October or December on the cards, providing the kind of future anchoring event for the markets they have been sorely lacking this week." Yellen's words might have provided a timely boost to the markets but changes in the economic landscape were not to be ruled out, warned Michael Hewson, chief market analyst at CMC Markets. "While markets appear to have taken comfort from the slightly clearer tone last night a lot can change between now and October and or December, and recent data does suggest that the Fed's timetable could well be blown off course," he said.

"Furthermore Yellen's assertion that inflation effects are short term and transitory doesn't bear up to the facts that commodity prices have been putting downward pressure on prices for over three years now.

"That's not transitory, that's a trend." Better-than-expected GDP On the economic data front, US gross domestic product expanded at an annualised pace of 3.9% in the second quarter, according to a final estimate from the Department of Commerce, up from the prior estimate of 3.1% and compared with analysts expectations for a 3.7% increase.

"Headline growth is likely to be held back by a slower pace of inventory investment in the third quarter, but we are tracking real final sales growth of 3.4%," analysts at Barclays (LSE: BARC.L - news) said in a note.

"This morning's data have no substantive effect on our tracking estimate, and we continue to look for GDP growth of 2.5% from the fourth quarter through late next year." A reading on consumer sentiment for September is on tap at 1500 BST.

Elsewhere, Asian stocks were mostly in the as investors were worried by the prospect of a hike in interest rates in the US, while European stocks gained, partly because of Yellen's remarks.

The dollar was broadly flat against the euro and gained 0.21% and 0.42% against the pound and the yen respectively, while gold futures shed 0.71% to $1,145.60.

Oil prices advanced, with West Texas Intermediate gaining 2.07% to $45.18 a barrel, while Brent rose 1.03% to $48.25 a barrel.

In company news, Nike (Sao Paolo: NIKE34.SA - news) surged 7.26% after delivering an upbeat quarterly earnings report on Thursday.

Ahead of the bell, BlackBerry (Swiss: BB.SW - news) posted a wider-than-expected adjusted loss in the second quarter. Shares (Berlin: DI6.BE - news) fell 0.56%.

Bed Bath & Beyond (NasdaqGS: BBBY - news) edged 0.03% higher, after the group said late on Thursday that like-for-like sales missed estimates in the last quarter.