Yellen took a more dovish tone than was widely anticipated during her testimony before the Congress on Wednesday, emphasizing the Central Bank’s objective of gradually normalizing monetary policy. In addition, she expressed a degree of optimism about the state of the US economy. Specifically, Yellen said interest rates did not need to rise much higher to achieve the Bank's monetary policy goals.
Following the latest speech, the likelihood of a September rate hike has been greatly reduced, with most economists now anticipating action during the December FOMC meeting. However, she did highlight the potential for tightening in the form of balance sheet reduction which may eventually prove negative for risk assets like stocks. The tech-focused Nasdaq added 1.10% to end the previous trading session at 5799. Given the technical backdrop, the index could rally towards immediate resistance at 5850.