While you were sleeping: Bernanke signals support
Feb 27 (BusinessDesk) – US Federal Reserve chief Ben Bernanke and the latest economic data provided the right mix for investors – further stimulus to underpin an accelerating recovery.
Reports on US consumer confidence and the housing market were better than anticipated. The Conference Board's consumer sentiment index rose to 69.6 this month, from a downwardly revised 58.4 in January, while new home sales jumped 15.6 percent to a 437,000 annual pace.
“Housing is now kicking into higher gear,” Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania, told Bloomberg News. “The next few months are still going to be a struggle for households as fuel prices are elevated, but the improvement in confidence reduces the risk of the worst-case scenario.”
Both Home Depot and Macy's provided evidence of strength in their latest earnings and outlook. Shares of Home Depot were last up 5.7 percent, while those of Macy's were last 3.4 percent stronger.
Bernanke's testimony to the Senate Banking Committee in Washington today allayed concern raised last week by the release of the latest Fed meeting minutes that central bank officials might ease or end their record stimulus measures sooner than previously thought.
"We do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation," Bernanke said today.
In afternoon trading in New York, the Dow Jones Industrial Average rose 0.83 percent, the Standard & Poor's 500 Index gained 0.29 percent, while the Nasdaq Composite Index added 0.16 percent.
"What Bernanke is saying, bottom line, indicates that there will not be a reversal anytime soon in the stimulus program," Peter Cardillo, chief market economist at Rockwell Global Capital in New York, told Reuters.
The Fed chief also reminded lawmakers that the federal spending cuts set to kick in on March 1 if Congress does not reach agreement to avoid them will hamper the economic recovery.
The good news in the US eased concern about the euro zone as Italy is trying to deal with elections that resulted in a split parliament, which risks hampering progress towards solving its national debt crisis and may reignite Europe's sovereign debt crisis too.
Italy's stocks and bonds dropped. The MIB Index tumbled 4.9 percent. The yield on Italy's 10-year benchmark bond surged 40 basis points.
Europe's Stoxx 600 Index finished the day with a decline of 1.3 percent from the previous close.