By Anora Mahmudova and Wallace Witkowski, MarketWatch

Equities brush aside Yellen hints at summer rate rise

U.S. stocks closed higher Friday as investors brushed aside Federal Reserve Chairwoman Janet Yellen comments that a rate increase may be justified this summer.

All three main indexes booked their biggest weekly gains in several weeks as traders headed for a long weekend. U.S. markets will be closed on Monday for the Memorial Day (http://www.marketwatch.com/story/when-do-markets-close-for-memorial-day-2016-05-25) holiday.

"It's appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time," Yellen said at a high-profile visit to Harvard University on Friday (http://blogs.marketwatch.com/capitolreport/2016/05/27/live-blog-and-video-of-janet-yellen-interview). That means a move could be appropriate in coming months, she said.

Earlier this month, minutes from the U.S. central bank's April meeting took markets by surprise by indicating a rate increase in June is still on the table.

"Yellen basically cemented what other Fed speakers had been saying over the past week and I am a little surprised how well the market has absorbed the news," said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

The S&P 500 rose 8.96 points, or 0.4%, to 2,099.06, with all ten main sectors finishing in positive territory. Energy shares were weighed down by falling oil prices. Financials, technology and telecoms shares led the gains.

"It is encouraging to see financials advancing but until we break past the 2,100 level, it is difficult to predict which way this market is going," Antonelli said.

The index closed within 1 point of the level many traders consider as a resistance level and booked a 2.3% weekly gain.

The Dow Jones Industrial Average gained 31.74 points, or 0.3%, to 17,873.22, recording a 2.1% weekly gain. Meanwhile, the Nasdaq Composite advanced 44.93 points, or 0.7%, to 4,933.50, ending the week 3.4% higher.

"The gains on the S&P 500 this week have been driven by several factors: oil going over $50 a barrel, gains in Asian and European markets, decreased anxiety about Brexit, and big jumps in home sales," said Randy Frederick, managing director of Trading & Derivatives at Schwab Center for Financial Research.

Oil prices (http://www.marketwatch.com/story/oil-spends-less-than-a-day-above-50-as-investors-cash-in-ahead-of-opec-2016-05-27) retreated after briefly topping $50 a barrel on Thursday and declining further on Friday. West Texas Intermediate crude oil settled 0.7% lower at $49.13 a barrel. Still, oil futures gained for the third consecutive week.

The ICE dollar index was up 0.6% to 95.76 (http://www.marketwatch.com/story/dollar-holds-tight-as-investors-wait-for-yellen-to-speak-later-2016-05-27).

Fed funds futures, which two weeks ago were pricing in only a 4% probability of a June rate increase, are now signaling a 30% chance on Friday, according to the CME Fed Watch tool (http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html). The probability of a July rate increase is at 60%.

Economic news: U.S. first-quarter economic growth (http://www.marketwatch.com/story/first-quarter-us-gdp-raised-to-08-2016-05-27)was revised up to 0.8% from a previous reading of 0.5%, based on a fresh estimate that shows somewhat stronger home construction and restocking of warehouse shelves.

Consumer sentiment eased slightly (http://www.marketwatch.com/story/consumer-sentiment-pulls-back-as-election-uncertainty-weighs-2016-05-27)in late but remained higher than in April as household views of the economy and finances stabilized.

At the Group of Seven meeting in Japan, political leaders warned of rising risks to the global economy (http://www.marketwatch.com/story/g-7-warns-against-currency-wars-reliance-on-new-monetary-policy-tools-2016-05-27), but stopped short of announcing any coordinated plan to tackle the concerns.

Movers & shakers: Shares of Ulta Salon Cosmetics & Fragrance Inc.(ULTA) jumped 9.1% after earnings from the makeup retailer released late Thursday topped Wall Street estimates (http://www.marketwatch.com/story/ulta-shares-rally-after-earnings-top-street-view-2016-05-26).

Valeant Pharmaceuticals International Inc.(VRX.T) rose 5.5% after a report said it had received and rejected a takeover offer (http://www.marketwatch.com/story/valeant-rejected-takeover-bid-from-takeda-tpg-report-2016-05-26) earlier this year from Japan's Takeda Pharmaceutical Co.(4502.TO) and private-equity firm TPG.

Big Lots Inc.(BIG) rallied 14% after the discount retailer boosted its outlook for the year (http://www.marketwatch.com/story/big-lots-raises-guidance-as-profit-increases-20-2016-05-27) and reported a 20% rise in profit.

Alphabet Inc.(GOOGL) rose 1.5% higher after the Google-parent on Thursday won a jury verdict (http://www.marketwatch.com/story/google-beats-oracle-in-landmark-case-involving-use-of-java-apis-in-android-2016-05-26) in a long-running case against Oracle Corp.(ORCL)

GameStop Corp.(GME) slumped 3.9% after the videogame retailer late Thursday reported an 11% drop in earnings (http://www.marketwatch.com/story/gamestop-posts-decline-in-revenue-profit-2016-05-26-174853626).

Other markets: European markets ended slightly higher (http://www.marketwatch.com/story/european-stocks-edge-lower-with-yellen-speech-ahead-2016-05-27) in cautious trade ahead of the Yellen speech. Equities finished (http://www.marketwatch.com/story/european-shares-waver-as-spanish-banks-slide-oil-stocks-rise-2016-05-26)mostly higher in Asia (http://www.marketwatch.com/story/asian-shares-head-for-third-straight-week-of-gains-2016-05-27).

Gold futures (http://www.marketwatch.com/story/golds-slide-extends-into-8th-day-brings-drop-in-may-to-55-2016-05-27) extended their slide on Friday, logging an eighth straight drop, as U.S. dollar strength helped push precious metals prices to their lowest level since early April. June gold fell $6.60, or 0.5%, to settle at $1,213.80 an ounce.

--Sara Sjolin in London contributed to this report.

(END) Dow Jones Newswires

May 27, 2016 16:19 ET (20:19 GMT)