US STOCKS-Dow, S&P 500 touch new highs after Yellen speaks; Cisco sinks

Thu Nov 14, 2013 3:02pm EST

* Fed's Yellen says she does not see asset bubbles

* Cisco shares tumble after revenue warning

* Walmart recovers after earlier drop on weak results

* Houghton Mifflin surges on return to market after bankruptcy

* Dow up 0.3 pct, S&P up 0.4 pct, Nasdaq up 0.1 pct

By Luke Swiderski

NEW YORK, Nov 14 (Reuters) - The Dow and S&P 500 hit record intraday highs on Thursday after Janet Yellen, the U.S. Federal Reserve Chair nominee, told a Senate committee the Fed's accommodative policies would continue as long as the economy remains fragile.

Gains in the technology-heavy Nasdaq and the Dow were held back by Cisco Systems, however, after the networking giant reported disappointing results on Wednesday. Cisco shares dropped nearly 12 percent.

Yellen's Q&A followed late gains in the market Wednesday ahead of the release of her prepared remarks. In her testimony, Yellen said the Fed's current $85 billion in monthly bond purchases "cannot continue forever," but dismissed the notion current prices suggest bubble-like conditions.

"I think it's becoming quite clear that Vice Chair Yellen will be continuing with an accommodative stance for some time," said Ryan Larson, head of equity trading at RBC Global Asset Management.

"Markets are breathing a little bit of a sigh of relief."

The Dow Jones industrial average rose 39.11 points or 0.25 percent, to 15,860.74, the S&P 500 gained 6.81 points or 0.38 percent, to 1,788.81 and the Nasdaq Composite added 3.481 points or 0.09 percent, to 3,969.056.

Cisco shares were on track to post their worst day since Feb. 10, 2011, slumping 11.7 percent to $21.18 after it warned its revenue would dive as much as 10 percent this quarter and keep contracting until after the middle of 2014.

"I think it caught people off guard," said Daniel Morgan, senior portfolio manager at Synovus Trust Company.

"I think they're thinking that with Microsoft and other old-line technology companies doing well, that Cisco would come in and at least produce an average quarter."

Cisco's retreat weighed down the S&P 500 technology sector , which fell 0.45 percent, but the other nine sectors were higher, boosted by confidence that Yellen will continue the Fed's current policies.

Since the beginning of the year, the S&P has gained 25.4 percent and the Dow 21 percent, thanks in part to the Fed's massive bond-buying stimulus.

Houghton Mifflin shares rose 28.75 percent to $15.45 on the textbook publisher's first day of trading after emerging from bankruptcy last year. The stock rose as much as 33 percent during the session.

Wal-Mart shares rebounded after earlier losses, rising 0.4 percent to $79.19 after the bellwether reported lower-than-expected quarterly sales. Kohl's slid 7.3 percent to $54.01 after the department store chain reported weaker-than-expected results.

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