Bernanke Calms Jittery Markets

Earlier Wednesday morning, the Commerce Department said fourth-quarter gross domestic product rose 2.2% vs. the advance reading of 3.5%, a decline that "is more consistent with our view of the overall economy than prior numbers," Bernanke says. "We expect moderate growth going forward. If the housing sector begins to stabilize, and inventories stabilize, we'll see some greater strength in the economy by the end of the year."

A stable housing market is a big if, however. The Census Bureau said Wednesday that new-home sales fell 16.6% in January. Housing inventories grinded higher -- against the grain of the stabilization argument. They grew to a 6.8-month supply, from a 5.7-month supply in December.

Bernanke also said there was no single trigger for Tuesday's market drop, adding that he's not concerned about a plunge in global liquidity.

Leading the Dow (and S&P) higher were gains ranging from 1% to 3.7% in American Express(AXP Quote), Disney(DIS Quote), Merck(MRK Quote), Procter & Gamble(PG Quote) and Verizon(VZ Quote).

The Dow's rebound was restrained by losses of 1% or greater in Alcoa(AA Quote), McDonald's(MCD Quote), DuPont(DD Quote) and IBM(IBM Quote).

Yields on U.S. Treasury bonds also moderated on Bernanke's words, as traders backed off their pessimistic bets. The 10-year yield, which moves in opposition to its price, ended at 4.55% from 4.51% Tuesday.

But even soothing words from Bernanke can't completely erase doubts about the economy. Consider that much of the data reported since his Feb. 14 Humphrey Hawkins testimony has been soft or inflationary.