Investing.com - U.S. stocks shot up on Tuesday after Federal Reserve Chair Janet Yellen reassured markets that monetary authorities will keep policy accommodative even as they wind down stimulus measures that have supported stocks since 2012.
At the close of U.S. trading, the Dow Jones Industrial Average rose 1.22%, the S&P 500 index gained 1.11%, while the Nasdaq Composite index rose 1.03%.
Speaking before the House Financial Services Committee earlier, Fed Chair Yellen suggested that the central bank would taper the pace of its asset purchases at future meetings if the economy continued to improve as expected.
The Fed is currently purchasing USD65 billion in Treasury holdings and mortgage debt a month to suppress interest rates to spur recovery, which sends stocks rising to encourage investment and hiring.
“Let me emphasize that I expect a great deal of continuity in the Federal Open Market Committee’s approach to monetary policy,” she said.
Still, Yellen added that the pace of the central bank’s bond purchases are not on a “preset course” and reiterated that the Fed plans to hold interest rates near zero “well past” the time the jobless rate falls below 6.5%.
Furthermore, Yellen said that "recovery in the labor market is far from complete" despite progress seen over the last year, describing the country''s 6.6% unemployment rate as "well above levels" that Fed officials consider sustainable in a healthy economy.
Yellen''s words, while in line with market expectations, kept sentiments firm that monetary authorities will trim asset purchases on a gradual basis, while tightening remains far off on the horizon, conditions that are supportive for further stock gains.
The Fed rolled out its bond-buying program in September of 2012. Since then, the Fed purchased USD85 billion in bonds a month until late 2013, when it began tapering the program.
Leading Dow Jones Industrial Average performers included Boeing, up 2.33%, Johnson & Johnson, up 2.05%, and Goldman Sachs, up 1.99%.
The Dow Jones Industrial Average''s worst performers included Cisco, down 0.48%, Coca-Cola, which was up 0.17%, and American Express, up 0.26%.
European indices, meanwhile, finished higher.
After the close of European trade, the EURO STOXX 50 rose 1.36%, France''s CAC 40 rose 1.09%, while Germany''s DAX 30 rose 2.03%. Meanwhile, in the U.K. the FTSE 100 finished rose 1.23%.