U.S. equities rose modestly as U.S. Fed Reserve Chair Jerome Powell said the U.S. economic recovery still hasn’t progressed enough to begin scaling back stimulus.

Technology stocks got a boost by news that Apple seeks up to a 20 percent increase in new iPhone production in 2021.

The defensive sectors outperformed and small-cap stocks declined more than 1 percent, signaling a cautious market undertone.

International equity markets were mixed, while the U.S. dollar was lower against major currencies.

Despite a hotter-than-expected reading on producer prices, longer-term government bond yields declined, with the 10-year falling to 1.35 percent.

The price of crude oil was down $2.55 at $72.70 and the spot price of gold was up $17.50 to $1,827.40.

Inflation and central bank policy were in focus today.

Following yesterday’s unexpected acceleration in consumer prices in June, producer prices reported Wednesday morning also rose more than consensus estimates.

The producer price index increased 1 percent in June over the previous month, and 7.3 percent over the same time last year.

The overshoot in prices is lasting longer than most expected earlier in the year, but inflation pressures are still seen as transitory, which is the view that policymakers continue to relay.

In his semiannual testimony to Congress, Powell said that inflation will remain elevated in coming months, driven by the economic reopening and supply shortages, before moderating as the pandemic-related factors diminish.

In his prepared remarks released before the testimony, Powell said the U.S. economic recovery still hasn’t progressed enough to begin scaling back the central bank’s asset purchases.

The commentary that “substantial further progress still a ways off” helped support stocks, as it is consistent with the view that the Fed will take a very patient approach in normalizing policy even after the recent hot inflation readings.

The tapering of asset purchases will likely continue to be debated over the coming Fed meetings but likely won’t start until early next year, with the first interest rate hikes still two years away.

On the corporate front, earnings continue to come in, with all major banks that have reported so far beating consensus estimates.

Demand for loans remains subdued as the government has pumped massive stimulus into the economy, which is likely to the reason why solid earnings have failed to produce a rally in bank stocks.

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