Bulls Put Faith in Bernanke
03/26/07 - 05:35 PM EDT
Liz Rappaport
The stock market is pricing in reassurance from the Federal Reserve.
After selling off most of the day on a decline in new-home sales and rising oil prices, the major indices staged a comeback, ending the day in the green, save for a small decline in the Dow Jones Industrial Average. It's as if traders looked at the calendar and saw Ben Bernanke on the docket Wednesday and breathed a sigh of relief. The Fed chairman testifies Wednesday before the Joint Economic Committee. After surprising the markets with last week's move to a more neutral stance regarding future policy decisions, Bernanke is likely be reassuring about the economic outlook. That is, unless he wants investors to think he's worried about a recession. Legislators will be voicing the concerns of their constituents about the rising defaults and foreclosures stemming from aggressive lending to subprime mortgage borrowers. According to Moody's Investors Service, 60-plus-day delinquencies on home equity loans rose 45.42% in December 2006 -- the largest year-over-year increase since September 1996. In December, 9.81% of those loans were in 60-plus-day delinquency, compared with 6.74% in 2005. From Bernanke's seat, the answers need to be comforting to stave off a massive overreaction. Truth is, Bernanke's words usually are soothing, and the stock market has come to rely on rallies when he speaks.
RSS
