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Bank stocks surge again, leading the broader market higher

Janet L. Yellen speaks about the future of the U.S. economy following the election.

U .S. stocks rose Thursday as banks resumed their steep upward climb and retailers moved higher. Federal Reserve chief Janet L. Yellen emphasized that the Fed plans to raise interest rates, which will help banks make more money from lending.

Stocks started the day with small gains and moved higher after Yellen's testimony to Congress. Banks once again marched higher as investors cheered the latest indication that interest rates will rise from their current ultra-low levels. Retailers also rose after strong earnings from Best Buy, while food and household goods makers struggled after weak results from Wal-Mart and J.M. Smucker.

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Almost all of the S&P 500's gains since the presidential election have gone to financial stocks. They lagged behind the overall the market for much of this year, but they're now trading at their highest levels since May 2008, months before the financial crisis peaked.

Investors hope banks will benefit from higher interest rates, faster economic growth and lighter regulation under President-elect Donald Trump.

"I wouldn't expect we're going to see the entire repeal of Dodd-Frank, but we could certainly see some changes that are positive for the financial services sector," said Kate Warne, an investment strategist for Edward Jones.

The Dow Jones industrial average advanced 35.68 points, or 0.2%, to 18,903.82. The Standard & Poor's 500 index rose 10.18 points, or 0.5%, to 2,187.12. The Nasdaq composite climbed 39.39 points, or 0.7%, to 5,333.97. The Dow has set several records since the election, and the S&P 500 and Nasdaq are close to records they set a few months ago.

Yellen told Congress that the economy is improving and added that that if the Fed keeps waiting now and raises rates too quickly later, that would increase the risk of a recession.

Investors already expected the Fed to raise interest rates when it meets in mid-December, and they felt Yellen's comments confirmed that higher rates are coming.

Bond prices slipped. The yield on the 10-year U.S. Treasury note rose to 2.29% from 2.22%. Bond yields rise when investors expect higher interest rates and inflation.

Bank of America rose 1.7% to $20.08; PNC Financial Services climbed 2.9% to $110.60.

Best Buy jumped 13.7% to a six-year high of $45.99 after greater sales of mobile phones and increased online sales helped the electronics retailer post a strong third quarter. The company also forecast a larger fourth-quarter profit than analysts had expected.

Other retailers also rose. Home Depot recovered some recent losses and advanced 2.9% to $128.93. Amazon ticked up 1.3% to $756.40 as Wal-Mart struggled.

"Instead of spending in traditional ways, consumers have decided to spend their additional dollars in technology and online shopping," Warne said.

Wal-Mart announced disappointing sales in its third quarter. The retailer's profit also fell as it invested more money in its stores and its online business. The stock fell 3.1% to $69.19. Warehouse club operator Costco and grocery store chain Kroger took small losses as well.

J.M. Smucker dropped 3.9% to $124.85 after the maker of jams and jellies disclosed weak sales. Tyson Foods fell 3.4% to $66.70.

Cisco Systems fell 4.8% to $30.05 after its earnings forecast disappointed Wall Street. The seller of routers, switches, software and services forecast a smaller-than-expected profit for its second fiscal quarter. That canceled out a strong first-quarter report.

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Oil refining company Tesoro will buy Western Refining for $37.30 a share in stock, a deal the companies valued at $4.1 billion. The stock closed at $30.50 on Wednesday, and it jumped 23.1% to $37.55 on Thursday. Tesoro shares rose 1% to $86.56.

Higher interest rates also mean a stronger dollar. The dollar climbed to 109.89 yen from 109.15 yen. The euro fell to $1.0626 from $1.0681. The ICE U.S. dollar index continued to rise; it's at its highest level in 13 years.

After the close of regular trading, Gap shares fell as much as 5% after the retailer said its third-quarter profit was down nearly 18%. It said costs related to store closures outside North America announced in May hurt results.

Oil prices gave up a small gain and turned lower. Benchmark U.S. crude slid 15 cents to $45.42 a barrel. Brent crude, which is used to price international oils, slipped 14 cents to $46.49 a barrel. Energy companies lagged behind the overall market after big gains earlier this week.

Wholesale gasoline rose 2 cents to $1.34 a gallon. Heating oil rose 1 cent to $1.45 a gallon. Natural gas fell 6 cents, or 2.2%, to $2.70 per 1,000 cubic feet.

Gold fell $7 to $1,216.90 an ounce and silver fell 16 cents to $16.77 an ounce. Copper rose 2 cents to $2.49 a pound.

The FTSE 100 index of leading British shares climbed 0.7%, and the CAC 40 in France rose 0.6%. Germany's DAX gained 0.2%. Japan's Nikkei 225 barely moved, and the Hang Seng index in Hong Kong eased 0.1%. The Kospi in South Korea inched up.

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UPDATES:

2:10 p.m.: This article was updated with the close of markets and with analyst comments.

8:40 a.m.: This article was updated with recent market figures, context and analysis.

This article was originally published at 6:45 p.m.

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