While you were sleeping: Yellen lifts US dollar

A trader works on the floor of the New York Stock Exchange. Photo / Getty Images

The US dollar strengthened while Wall Street held on to gains after Federal Reserve Chair Janet Yellen warned against the central bank moving "too gradually" on tightening monetary policy.

"A gradual approach is particularly appropriate in light of subdued inflation and a low neutral real interest rate, which imply that the FOMC [Federal Open Market Committee] will have only limited scope to cut the federal funds rate should the economy be hit with an adverse shock," Yellen said in prepared remarks for a speech in Cleveland, Ohio. "But we should also be wary of moving too gradually."

In 2.19pm trading in New York, the Dow Jones Industrial Average inched 0.04 per cent higher, while the Nasdaq Composite Index rose 0.3 per cent. In 2.04pm trading, the Standard & Poor's 500 Index added 0.2 per cent.

US Treasuries slipped, pushing yields on the 10-year note one basis point higher to 2.23 per cent.

"The Fed is in a bit of a quandary," Phil Blancato, chief executive of Ladenberg Thalmann Asset Management in New York, told Reuters. "The market is concerned about the Fed being aggressive, perhaps pushing us to a place where we don't want to be, whether it's an inverted yield curve or recession".

The Dow inched higher as gains in shares of Apple and those of IBM, recently up 2.1 per cent and 0.7 per cent respectively, offset declines in shares of McDonald's and those of DowDuPont, recently down 1.6 per cent and 0.9 per cent respectively.

The VIX, or the Chicago Board Options Exchange Volatility Index which measures expectations of future volatility in stocks, slipped 0.4 per cent to 10.17.

In the latest US economic data, a Conference Board report showed its consumer confidence index fell to 119.8 in September, down from 120.4 in August, the highest reading in five months.

In Europe, the Stoxx 600 Index ended the day little changed from the previous close. France's CAC 40 Index eked out a 0.03 per cent gain, while Germany's DAX Index rose 0.1 per cent. The UK's FTSE 100 Index fell 0.2 per cent.

Shares of Switzerland's Nestle rose after the world's top packaged-food company set a profit margin target amid activist investor Dan Loeb's calls for improved performance.

Nestle set an underlying trading operating profit margin target of 17.5 per cent to 18.5 percent by 2020, up from 16.0 per cent in 2016, the company said in a statement. The target was enough to quieten calls for change, Thomas Russo, a Nestle shareholder for more than 30 years whose firm Gardner Russo & Gardner has a stake worth more than US$1 billion, told Reuters.

"It gives them the ability to stay at work without having the distraction of whether they'll concede a margin guidance, but at the same time not burden themselves from making the kind of bold investments that are required to deliver long-term value," Russo said

Nestle shares closed 1.8 per cent higher in Zurich.

"I can tell you put a lot of work into this," Loeb told Chief Financial Officer Francois-Xavier Roger as the two chatted about Nestle's presentation in London afterward, Bloomberg reported. "You did a great job."