NEW YORK Stocks gained on markets worldwide on Monday, while the U.S. dollar edged lower against major currencies after Federal Reserve Chair Janet Yellen said U.S. interest rate hikes are likely on the way, but dropped a reference to the timing of any increase.
Yellen's remarks caused U.S. Treasury yields to pare gains and limited a rally in oil prices, which hit a seven-month high earlier in the session on supply worries.
In the last public comment from any U.S. central banker before the policy meeting next week, the Fed chief said last month's jobs report was "disappointing" and bears watching, though she warned against attaching too much significance to it on its own.
"If incoming data are consistent with labor market conditions strengthening and inflation making progress toward our 2 percent objective, as I expect, further gradual increases in the federal funds rate are likely to be appropriate," Yellen said at the World Affairs Council of Philadelphia.
She was careful, however, not to give a time-frame for raising interest rates, in contrast to a speech on May 27, when she said "probably in coming months such a move would be appropriate."
To some investors, the absence of a time frame suggests the Fed will delay its next rate hike well beyond next week, when U.S. central bankers gather to make monetary policy.
"I think she's still committed to rate hikes, but she is emphasizing there's not a timetable. She didn't say 'in the next few months,' which is dovish," said Bucky Hellwig, senior vice president at BB&T Wealth Management, in Birmingham, Alabama.
The greenback, which suffered its biggest one-day drop against a basket of major currencies .DXY in four months on Friday after a poor payrolls report, fell to its lowest in almost four weeks and was last down 0.05 percent at 93.986.
World equity markets were higher, and MSCI's all-country world equity index .MIWD00000PUS was up 0.53 percent for a third straight session of gain.
On Wall Street, the Dow Jones industrial average .DJI ended up 113.27 points, or 0.64 percent, at 17,920.33. The S&P 500 .SPX closed up 10.28 points, or 0.49 percent, at 2,109.41 and the Nasdaq Composite .IXIC added 26.20 points, or 0.53 percent, to 4,968.71.
The S&P 500 hit a 7-month intraday high, helped by Yellen's comments and gains in oil and energy shares.
Europe's broad FTSEurofirst 300 index .FTEU3 closed up 0.35 percent at 1,344.19, bolstered by gains in major mining and oil company shares, including Anglo American (AAL.L), Rio Tinto (RIO.L) and BHP Billiton (BLT.L).
In the bond market, U.S. Treasuries reversed some price declines but still ended weaker after Yellen's remarks.
"The mixed message today suggests that Yellen is disinclined to move forward and take the next step in the normalization process in the near-term, but it also does not shut the door on the prospects for a July rate (hike) either," said Thomas Simons, a money market economist at Jefferies in New York.
Benchmark 10-year notes US10YT=RR ended down 6/32 in price to yield 1.723 percent, up from a two-month low of 1.697 percent on Friday.
Global oil benchmark Brent initially hit seven-month highs on worries about plummeting Nigerian production but cut gains after Yellen's remarks.
Brent crude LCOc1 settled up 91 cents, or 1.83 percent, at $50.55 a barrel. U.S. crude CLc1 settled up $1.07, or 2.2 percent, at $49.69 per barrel.
Spot gold XAU= held steady near a 2-week high and was last up 0.07 percent to $1,244.99 an ounce.
(Additional reporting by Caroline Valetkevitch, Karen Brettell and Richard Leong in New York; Editing by Nick Zieminski and Dan Grebler)
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