Achieving Trading Equilibrium: 11 Feb 2014 AMC- Market Rally as Yellen speaks

Market summary

The stock market rallied steadily throughout the Tuesday session with the Dow Jones Industrial Average (+1.2%) providing the lead. Thanks to the advance, the Dow narrowed its 2014 loss to 3.5% while the Nasdaq (+1.0%) was able to swing from a loss to a year-to-date gain of 0.4%. The S&P 500 (+1.1%) regained its 50-day moving average with all ten sectors contributing to the climb.

Heading into the session, many participants were anxious to hear Janet Yellen's first testimony as the new Fed Chair, but the lengthy appearance before the House Financial Services Committee was largely uneventful.

Like her predecessor, Ms. Yellen indicated the Fed plans to remain data dependent in its decision making and that measured tapering will continue unless economic data takes a turn for the worse. When asked about the impact of the disappointing jobs reports for December and January on the Fed's reaction function, Ms. Yellen said it would be premature to alter policy based on a limited sample size.

In other news from Washington, all signs pointed to the House of Representatives being ready to pass an unconditional bill to raise the debt ceiling, which likely contributed to the market's sunny disposition.

All ten sectors took part in today's advance with energy (+1.4%) and materials (+1.2%) ending in the lead. The energy sector drew strength from top components like Chevron (CVX 113.58, +1.89) while crude oil ended little changed at $99.95 per barrel.

Elsewhere, the materials space received significant support from miners. Royal Gold (RGLD 65.20, +2.66) and Randgold Resources (GOLD 77.08, +2.55) posted respective gains of 4.3% and 3.4% while the broader Market Vectors Gold Miners ETF (GDX 25.65, +0.95) jumped 3.9% and regained its 200-day moving average. On a related note, gold futures rose 1.2% to $1289.70 per troy ounce.

With regard to other growth-sensitive sectors, technology (+1.2%) and industrials (+1.1%) outperformed while consumer discretionary (+0.7%) and financials (+1.0%) lagged.

On the countercyclical side, health care and telecom services both gained 1.3% while consumer staples and utilities added 1.1% and 0.9%, respectively.

Treasuries ended on their lows with the 10-yr yield up four basis points at 2.72%.

Despite the broad rally, trading volume was below average as less than 700 million shares changed hands at the NYSE.

Today's economic data was limited to December wholesale inventories, which increased 0.3% after increasing 0.5% in November. The Briefing.com consensus expected an increase of 0.6%. The BEA assumed merchant wholesaler inventories rose 0.6% in December when calculating the advance fourth quarter GDP report. The lower-than-expected increase in wholesale inventories will result in a negative revision to fourth quarter GDP growth.

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the January Treasury budget will be released at 14:00 ET.