* Yellen says gradual hikes should continue despite weak inflation
* Technology stocks rebound, led by Apple
* Darden Restaurants drops on disappointing outlook
* Dow up 0.05 pct, S&P 500 up 0.11 pct, Nasdaq up 0.32 pct (Updates to mid-afternoon, changes byline)
By Chuck Mikolajczak
NEW YORK, Sept 26 (Reuters) - U.S. stocks advanced modestly on Tuesday as technology shares bounced from sharp losses in the prior session and comments from Fed Chair Janet Yellen boosted expectations of a December rate hike.
Yellen said the Fed needs to continue gradual rate hikes and it would be imprudent to leave rates on hold until inflation reached the Fed’s 2-percent target.
Earlier in the session, Atlanta Fed Chief Raphael Bostic, a non-voting member this year, said he would want “clear evidence” that prices were firming before committing to another rate increase, but did not rule out another hike in 2017.
Chances of a rate hike in December rose to 78 percent from about 40 percent a month ago, according to CME Group’s FedWatch tool.
“Until either (she) or her cohorts say something that is not expected, the market is going to roll over pretty much everything they say,” said David Schiegoleit, managing director of investments, U.S. Bank Private Wealth Management in Newport Beach, California.
Economic data showed U.S consumer confidence fell in September while home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma.
The Dow Jones Industrial Average rose 11.5 points, or 0.05 percent, to 22,307.59, the S&P 500 gained 2.69 points, or 0.11 percent, to 2,499.35 and the Nasdaq Composite added 20.25 points, or 0.32 percent, to 6,390.84.
Technology, up 0.56 percent, was the best performing major sector, recovering somewhat from losses in the prior session. Tech shares suffered their worst one-day drop in five weeks on Monday as concerns over tensions with North Korea prompted investors to book profits in what has been the best performing sector this year.
Apple rose 2.11 percent after four straight sessions of losses to help prop up the three major indexes, after Raymond James boosted its price target on the iPhone maker to $180 from $170.
“When we woke up today and the lights still came on everybody may have said there are some opportunity in those tech shares. It is simply just a little bit duller, mirror image of what we saw yesterday,” said Schiegoleit.
Marine Corps General Joseph Dunford said the U.S. regards North Korea as the world’s greatest threat but despite an escalation in tensions over its ballistic missile and nuclear program, Pyongyang has not changed its military posture.
Darden Restaurants slumped 5.60 percent after the Olive Garden parent said it expected the negative effects on sales and earnings from Hurricane Irma to be about double that from Hurricane Harvey.
Red Hat rose climbed 4.09 percent after the Linux distributor’s quarterly profit came in above estimates and the company raised its full-year forecast.
Advancing issues outnumbered declining ones on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 1.59-to-1 ratio favored advancers. (Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)