Stocks Like Bernanke Banter

As traders rang in the new year and strong fourth-quarter data rolled in, the markets unwound their rate-cut hopes, and bond yields rose to reflect faith in a more resilient economy. Several Fed speakers helped bond yields along with hawkish talk that put the specter of rate hikes back on the table.

The bond market took Bernanke's testimony as a signal that rate cuts are once again on the way, says T.J. Marta, fixed-income strategist at RBC Capital Markets. He added that bond traders also are extremely anxious about the subprime mortgage market sinking the economy.

The subprime market has garnered many headlines lately amid warnings from big players New Century Financial (NEW Quote) and HSBC(HBC Quote), which have been hurt after several years of low rates and loose lending standards.

Stock-traders had a different take on the testimony. They wouldn't go so far as to call it dovish, but they said it was "Goldilocks" and "status quo."

"Last week, fears crept up that the Fed would be raising rates, so this is about relief that there won't be more rate hikes, not about expectations for rate cuts," says Todd Leone, head of listed trading at Cowen & Co.

Interest rate-sensitive financial companies rallied with relief about no more rate hikes. Goldman Sachs(GS Quote), Citigroup(C Quote) and JPMorgan Chase(JPM Quote) jumped more than 1%.