Stocks Like Bernanke Banter

Updated from 2:49 p.m. EST

The markets asked Fed Chairman Ben Bernanke to be their Valentine Wednesday, and he accepted, though perhaps somewhat unwittingly.

As soon as the headlines on Bernanke's semiannual testimony to Congress hit the tape at 10 a.m. EST, the Dow Jones Industrial Average quickly jumped into record territory. The S&P 500 and the Nasdaq Composite also surged, and stayed well in the green throughout Bernanke's question-and-answer session on Capitol Hill.

The rally came despite uninspiring, flat January retail sales and business inventories for January and December, respectively. The DJIA finished up 0.7% to close at a new high of 12,741.86. The S&P climbed 0.8% to close at 1455.29, and the Nasdaq surged 1.2% to 2488.38.

The Dow Jones Transportation Average also reached a new all-time high, jumping 2.1% -- once again "confirming" the market's rally. Likewise, the Dow Jones Utilities Index also closed at record levels.

Bonds also rallied on Bernanke's testimony, sending the 10-year yield down to 4.73% from 4.81% at the end of the day Tuesday.

Bernanke's speech didn't stray from recent Fed portrayals of a strong and resilient economy, somewhat moderating inflation, but remaining risks that inflation could resurge. Basically, the chairman portrayed a Fed still on hold with a bias to tighten, but the markets saw doves flying.

On the economy, Bernanke said that "the resilience of consumer spending is all the more striking given the backdrop of the substantial correction in the housing market." On housing, Bernanke noted that while the decline in residential construction likely would drag down GDP growth in future quarters, "some tentative signs of stabilization have recently appeared in the housing market."