After trading slightly higher in the early morning, the various stock index futures exploded to the upside around 9 AM. The text of Fed Chair Janet Yellen’s Congressional testimony was released at that time. In it, she said that interest rates might not have to get too much higher as “gradual” rate hikes are needed to sustain the expansion. She insisted on repeating that “unusual” price reductions have limited the rise of inflation and perhaps these lower price levels are going to become a more permanent feature. She also said that the Fed’s $4.5 trillion balance sheet is going to have to be reduced later this year.

These remarks boosted the markets as the DOW managed an intraday all-time record high of 21,580 for a gain of 171 points. By the end of the session the DOW had fallen down from these peaks to close 123 points ahead at 21,532. The S&P 500 gained 17 and the NASDAQ added 67 points today.

The Dow was led by BA at another new high, DD, HD and the healthcare components JNJ and UNH plus MCD. The NASDAQ was jettisoned by another strong showing from AMZN back over 1000 again after the success of “prime day” sales yesterday. In addition, the upside regulars moved higher: FB at a new high, NFLX, ISRG, NVDA, PCLN and even TSLA, higher again for the fourth straight day.

Breadth numbers were strong at a 5 to 1 upside ratio. The VIX fell down 5% at 10.30. Based upon the VIX at these levels, further equity gains might start to become limited.

Bond yields fell back to 2.32% for the 10-year Treasury Note after Yellen’s comments while the dollar finally weakened against the Japanese yen. Gold was higher to $1,219 an ounce while crude oil was flat at $45.66 a barrel.

Donald M. Selkin

These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author. Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning.  The commentary provided in this Market Letter is intended to provide timely market analysis and should not be considered a research report.  This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings in particular industries or securities.  This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm.  This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author.  These news sources include the following: Bloomberg Financial, Reuters, and the Associated Press.