Stocks jump as Bernanke sees rates remaining low
NEW YORK (AP):
Stocks rebounded from a two-day slide Wednesday as Federal Reserve Chairman Ben Bernanke told Congress that low interest rates are still needed to support the economy.
Bernanke sounded an upbeat note about a recovery as part of his regular semi-annual report to Congress on the economy. He told the House Financial Services Committee he still expects interest rates will remain low for an extended period. Investors want to see low-cost borrowing continue to help revive the economy.
At the same time, a disappointing report on new home sales brought the latest reminder that a recovery in the economy will be difficult even with government aid.
The Commerce Department said sales of new homes fell to a record low in January. Economists expected an increase. The government said that new home sales fell 11.2 per cent last month to a seasonally adjusted annual sales rate of 309,000 units. That's the lowest level on a record that goes back nearly 50 years.
It was the third straight monthly drop.
Housing has been a big concern for investors who this week have been worrying about consumer spending. A surprising drop in consumer confidence reminded investors of the fragility of the economic recovery and sent stocks sliding on Tuesday. The market also posted modest losses on Monday.
In midday trading, the Dow rose 77.24, or 0.8 per cent, to 10,359.65. The broader Standard & Poor's 500 index rose 8.08, or 0.7 per cent, to 1,102.68, and the Nasdaq composite index rose 20.71, or 0.9 per cent, to 2,234.15.
Bond prices mostly rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.68 per cent from 3.69 per cent late Tuesday.
The dollar fell against other major currencies following Bernanke's remarks because low interest rates make the currency a less attractive investment. The drop in the dollar lifted prices of commodities, which become cheaper for foreign buyers when the dollar falls. The gain in commodity prices, in turn, lifted energy and materials stocks.