United States Federal Reserve Chairman Ben Bernanke. - REUTERS
NEW YORK (AP):
STOCKS AND bonds rallied sharply Wednesday after United States central bank chairman Ben Bernanke soothed investors with his view that economic growth seems to be moderating and inflation remains contained. The Dow Jones industrial average gained nearly 190 points, while Treasury bonds recovered from earlier losses and moved higher.
Wall Street interpreted Bernanke's testimony before Congress as a sign the Federal Reserve is close to ending its streak of interest rate hikes. Bernanke told the Senate Banking Committee, "We think inflation is going to moderate," and said the Fed's previous policy actions, such as rate hikes, could still affect the economy. However, he hedged the inflation outlook by talking about risks that could send prices higher.
Two government reports indicated the economy is slowing, with core inflation coming in lower than expected and new home construction falling. Strong earnings from International Business Machines Corp., United HealthGroup Inc. and two of the nation's largest banks also helped investors look past continued fighting in the Middle East.
"The market has been in sell-off mode," said Jim Herrick, director of equity trading at Baird & Co. "Today, at least, the geopolitical issues are put on the back burner and the focus is on earnings and comments from Bernanke."
In mid-afternoon trading, the Dow rose 187.94, or 1.74 per cent, to 10,987.17.
Broader stock indicators also gained sharply. The Standard & Poor's 500 index rose 20.64, up 1.67 per cent, to 1,257.50, and the Nasdaq composite index rose 34.12, or 1.67 per cent, to 2,077.34.
