U.S. stocks closed mixed on Wednesday as investors digested remarks from the top Federal Reserve official, having parsed through a series of corporate earnings and economic data.
The S&P 500 closed about 0.20 percent higher, with financials leading advancers. The Nasdaq composite outperformed, rising approximately 0.3 percent, as shares of Netflix rose in choppy trade. The video streaming giant is scheduled to report quarterly results Wednesday after the bell.
"Short-term overbought conditions continue to challenge the major U.S. equity indices, which have exhibited weak short-term momentum in recent weeks," said Katie Stockton, chief technical strategist at BTIG. "The 20-day moving average has flattened for the [S&P 500], which last occurred in the beginning of September before a more significant pullback developed."
In prepared remarks, Fed Chair Janet Yellen said the U.S. economy is closing in on the central bank's goals, giving it impetus to start reducing the extreme levels of support it has provided over the past decade. "Right now our foot is still pressing on the gas pedal, though, as I noted, we have eased back a bit," Yellen said.
Treasury yields extended gains after Yellen's speech was released, with the benchmark 10-year note yielding 2.42 percent.
Market participants have been largely focusing on President-elect Donald Trump's plans for fiscal stimulus, deregulation of certain sectors and tax reform. The broader U.S. indexes have risen to record highs since the election.
"In many ways, Trump has eclipsed the messaging from Fed officials," said Quincy Krosby, market strategist at Prudential Financial. "The Fed's message is an extremely important part to the market's equation."
"The market is expecting clarity over the first few months of the administration. There remains some trepidation with regard to trade policy," Krosby said. Throughout his campaign and since his victory, Trump has expressed protectionist views on trade, including the need for renegotiating key trade agreements, such as NAFTA.
Investors also focused on corporate quarterly results, as Goldman Sachs and Citigroup posted better-than-expected earnings. Goldman received a surge in trading revenue, but the stock fell 0.75 percent.
"The run-up in financials has been big since the election. Goldman has been the leader in that," said Art Hogan, chief market strategist at Wunderlich Securities. "Their earnings were blockbuster, but not enough" to keep investors from taking profits.
In economic news, the Consumer Price Index rose 0.3 percent, in line with expectations, putting it up 2.1 percent year over year. This was also the first time CPI rose above 2 percent since 2014.
"I think this gives the Fed more credence to raise rates three times, even though the market tells them it will probably be two times," said Kim Forrest, senior equity analyst at Fort Pitt Capital. "This is fuel for growth."
Other economic data released Wednesday included industrial production, which grew 0.8 percent in December, and the NAHB survey for January, which showed homebuilder sentiment pull back slightly. The Fed also released its latest Beige Book, which said that a pickup in manufacturing, "widespread" reports of labor shortages and improving business investment set the stage for the central bank's December rate hike.
"Similar to the rally of the broader equity indices, the steepening of the treasury yield curve has reflected burgeoning expectations for the economy and inflation," said Jeremy Klein, chief market strategist at FBN Securities, in a note. "Today's macro numbers hardly suggest that the latter has started to climb at an uncomfortable pace."
Overseas, European equities closed slightly higher, as the Stoxx 600 index gained 0.18 percent, a day before the European Central Bank delivered its latest monetary policy decision. In Asia, stocks closed mostly higher, with the Shanghai composite advancing 0.14 percent and the Nikkei 225 rising 0.43 percent.
The rose 4 points, or 0.18 percent, to end at 2,271.89, with financials leading six sectors higher and telecommunications lagging.
The Nasdaq composite rose 16.93 points, or 0.31 percent, to end at 5,542.
Advancers were a step ahead of decliners at the New York Stock Exchange, with an exchange volume of 759.08 million and a composite volume of 3.258 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.44.
U.S. crude prices fell 2.67 percent to settle at $51.08 per barrel amid the prospects of rising shale production.
—CNBC's Jeff Cox and Reuters contributed to this report.
On tap this week:
Earnings: TD Ameritrade, Netflix, Commerce Bancshares
7:45 a.m. European Central Bank rate decision
8:30 a.m. Initial claims
8:30a .m. Housing starts
8:30 a.m. Philadelphia Fed survey
3:45 p.m. San Francisco Fed's Williams
4:00 p.m. Boston Fed President Eric Rosengren
9:00 a.m. Philadelphia Fed President Patrick Harker
1:00 p.m. San Francisco Fed's Williams