By Sweta Singh and Tanya Agrawal
(Reuters) - U.S. stocks were higher in late morning trading on Wednesday, with the Dow hitting a record, after Federal Reserve Chair Janet Yellen said interest rates hikes would be gradual and will not have to rise much further to reach the neutral rate.
Yellen, in a prepared testimony delivered to Congress, said the economy is healthy enough to absorb further gradual rate increases and the slow wind down of the Fed's massive bond portfolio.
The testimony depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment.
Investors and some Fed officials, concerned with the recent dip in inflation, have been wanting to see a surer progress toward the central bank's goal of 2 percent inflation.
Yellen said some temporary factors appear to be at work in holding down inflation but the Fed was focused on achieving the target.
"It was a little bit more dovish than most had thought," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.
"She said rates won't have to rise much further to get to neutral, I thought that was key. She said inflation response to economy is a key uncertainty, alluding to the inflation again, part of the dovishness."
The U.S. central bank will also issue its Beige Book at 2 p.m. ET, a compendium of anecdotes on the health of the economy. The Fed's next policy meeting is on July 25-26.
At 10:47 a.m. ET (1447 GMT), the Dow Jones Industrial Average <.DJI> was up 146.9 points, or 0.69 percent, at 21,555.97. It had hit a record of 21580.79.
The S&P 500 <.SPX> was up 16.48 points, or 0.67 percent, at 2,442.01 and the Nasdaq Composite <.IXIC> was up 51.59 points, or 0.83 percent, at 6,244.89.
All 11 major S&P 500 sectors were higher, with the defensive utilities index's <.SPLRCU> 0.91 percent rise leading the advancers.
The financial index <.SPSY>, which is sensitive to rate hikes, pared early losses to trade little changed.
Chances of an interest rate hike at the Fed's December meeting fell to 53 percent from 60 percent after the release of Yellen's testimony, according to CME Group's FedWatch tool.
Investors will be keeping an eye on second-quarter earnings reports on Friday from big U.S. banks including JPMorgan Chase <JPM.N>, Wells Fargo <WFC.N> and Citigroup <C.N>.
Stocks of Amazon.com <AMZN.O> edged up 0.7 percent after the online retailer said its Prime Day sale was the biggest shopping event by sales in its history. The stock was among the biggest boosts on the Nasdaq.
Advancing issues outnumbered decliners on the NYSE by 2,416 to 376. On the Nasdaq, 2,088 issues rose and 565 fell.
(Reporting by Sweta Singh and Tanya Agrawal in Bengaluru, Additional reporting by Sinead Carew in New York; Editing by Arun Koyyur)