Wall St. rallies as Powell stays on rate-hike course

(Reuters) – Wall Street rallied on Friday, with the S&P 500 and the Nasdaq hitting all-time highs, after Federal Reserve Chair Jerome Powell said the central bank’s current approach to interest rate hikes was the best way to protect the U.S. economic recovery.

Gradual rate hikes are also the best way to keep job growth as strong as possible and inflation under control, Powell said. His comments did little to change market expectations of a rate hike in September and perhaps again in December.

“The Fed is very confident in the U.S. economy, and Powell is indicating the Fed has no intention of slowing down rate hikes and it appears they are going to be looking past trade concerns for now,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte.

“We are seeing some of the more cyclical sectors like energy and materials continuing to move higher on the expectation that the Fed is going to let the economy run a little hot.”

A dip in the dollar after Powell’s comments helped lift oil and metal prices. The materials sector .SPLRCM jumped 1.33 percent, the most among the 11 S&P sectors, and the energy sector .SPNY gained 1.03 percent. [O/R] [MET/L]

The KBW bank index .BKX rose 0.24 percent, less than the broader S&P financials index’s .SPSY 0.42 percent increase. All of the 11 major sectors were higher.

Economic data also boosted sentiment. New orders for key U.S.-made capital goods increased more than expected in July and shipments growth held firm, the Commerce Department said.

At 12:49 a.m. EDT the Dow Jones Industrial Average .DJI was up 158.05 points, or 0.62 percent, at 25,815.03, the S&P 500 .SPX was up 18.29 points, or 0.64 percent, at 2,875.27 and the Nasdaq Composite .IXIC was up 67.10 points, or 0.85 percent, at 7,945.56.

The small-cap Russell 2000 index jumped 0.53 percent to a record high.

If the S&P ends the session above its Jan. 26 record close, that would confirm the benchmark index’s longest-ever bull-market run.

Netflix (NFLX.O) rose 4.8 percent after SunTrust Robinson Humphrey upgraded the stock to “buy,” saying current-quarter subscriber growth was solidly in line or ahead of estimates.

Autodesk (ADSK.O) leaped 15.2 percent, the most on the S&P, after the software maker’s quarterly results beat estimates.

Gap Inc (GPS.N) sank 10 percent and Foot Locker (FL.N) 11.7 percent after the two retailers posted disappointing same-store sales.

Advancing issues outnumbered decliners by a 2.53-to-1 ratio on the NYSE. Advancing issues outnumbered decliners by a 1.88-to-1 ratio on the Nasdaq.

The S&P index recorded 35 new 52-week highs and three new lows, while the Nasdaq recorded 137 new highs and 26 new lows.