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Dow Sings on Upbeat Data, Bernanke

NEW YORK (TheStreet) -- Major U.S. stock averages rebounded Tuesday from the prior session's swoon after a raft of upbeat economic data and earnings reports, and after Federal Reserve Chairman Ben Bernanke indicated continued support for monetary easing in his semi-annual testimony before Congress.

Bernanke said, though, that the Fed alone couldn't bear the entire burden of spurring the economic recovery, and urged lawmakers to find alternatives to the sequestration ahead of a March 1 deadline.

The Dow Jones Industrial Average gained 116 points, or 0.84%, at 13,900. The blue-chip index has bounced back from Monday's sharp fall, when it suffered its largest one-day point and percentage declines since Nov. 7, 2012.

Winners were outpacing losers 23 to six. Microsoft (MSFT) closed unchanged. Home Depot (HD), Intel (INTC), Chevron (CVX) and Hewlett-Packard (HPQ) posted the sharpest percentage increases.

Home Depot, the biggest home-improvement retailer, posted fourth-quarter earnings Tuesday of 67 cents a share on revenue of $18.2 billion; analysts were looking for earnings of 64 cents a share on revenue of $17.69 billion. Comparable-store sales increased 7% in the quarter. The company also said it increased its quarterly dividend by 34%. Shares gained 5.8%, also getting a boost amid encouraging housing market reports Tuesday.

Homebuilder stocks were also jumping after the housing market reports. PulteGroup (PHM) closed up 5.7% and Toll Brothers (TOL) added 3.3%.

Merck (MRK), UnitedHealth (UNH), Cisco (CSCO) and JPMorgan (JPM) shares slid.

JPMorgan Chase plans to cut 4,000 jobs in 2013 as it seeks to reduce $1 billion in expenses, according to a presentation to investors posted on the bank's Web site. Shares closed down 0.21%.

The S&P 500 climbed 9 points, or 0.61%, at 1,497. The Nasdaq finished ahead by 13 points, or 0.43%, at 3,130.

All sectors in the broad market were in the green, spearheaded by gains in capital goods, conglomerates and consumer cyclical stocks.

Volumes totaled 3.87 billion shares on the New York Stock Exchange and 1.83 billion shares on the Nasdaq. Advancers were outweighing decliners by a 2-to-1 ratio on the Big Board and by a 1.5-to-1 ratio on the Nasdaq.

Major U.S. stock averages each fell more than 1% Monday and the VIX fear gauge spiked as investors feared that the latest updates from Italy's elections were portending the risk that the country could backpedal from its austerity programs.

"The week failed to get off to a strong start, as the Dow Jones continued to battle with the round-number 14,000 area," said Joe Bell, senior equity analyst with Schaeffer's Investment Research. "After such a strong rally this year, these round number areas often act as logical levels for investors to take profits."

A pre-published copy of Bernanke's semi-annual testimony before the Senate Banking Committee in Washington indicated that the Fed chairman continues to have an accommodative view on monetary policy. He said that although a long period of low rates could encourage excessive risk-taking, to this point "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."

At the same time, he said the Fed is confident that it has the tools necessary to tighten monetary policy when that is needed.

Bernanke warned monetary policy alone cannot carry the entire burden of speeding up the U.S. economic recovery. He advised Congress and the Obama administration to consider replacing the sharp spending cuts required by the sequestration with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run. He explained that such an approach could lessen near-term fiscal headwinds and more effectively address longer-term imbalances in the federal budget.

"The party's not over yet," Jordan Waxman, managing director and partner at HighTower HSW Advisors, said of the intention of central banks around the world to maintain easy monetary policies. Waxman likens these efforts to "reflate" economies and create more lending to a "high-stakes" poker game that has been fueling the markets since 2009. Central banks will maintain these policies until they see the labor market tighten and housing markets recover.

At some point, though, said Waxman, the Fed, for one, will have to stop purchasing long-dated assets, and allow the market to dictate interest rates.

"The Treasury, which has been printing money 24-7, will probably have to stop pumping money into the economy, and what they will have to engineer is a soft landing. And so the risk is it's not going to be a soft landing. A risk is that you get a material shock to interest rates, which could be ill-timed," Waxman said.

Waxman said for now, though, investors have reached an inflection point where they're starting to believe that the easy money will work. With the markets bumping up against recent highs -- if reflation really does occur -- a real bull market could ensue, according to Waxman.

A number of upbeat U.S. data points were released Tuesday morning.

The Conference Board said that its consumer confidence indicator rose in February to 69 from 58.6. Economists were anticipating an increase to 62.

The Census Bureau reported that new-home sales rose to a seasonally adjusted annual rate of 437,000 in January from an upwardly revised 378,000 the prior month. Expectations were for a rise to an annual pace of 383,000 in January.

The Case-Shiller 20-city index for December showed a rise of 6.8%, up from a downwardly revised increase of 5.4% the prior month, and above expectations of a 6.5% gain.

The Federal Housing Finance Agency's housing price index for December increased 0.6%, up from a downwardly revised 0.4%.

Gold for April delivery rose $28.90 to settle at $1,615.50 an ounce at the Comex division of the New York Mercantile Exchange, while April crude oil futures fell 48 cents to close at $92.63 a barrel.

The benchmark 10-year Treasury was down 6/32, raising the yield to 1.889%. The dollar was lowering by 0.06%, according to the U.S. dollar index.

In corporate news, Cracker Barrel Old Country Store (CBRL) shares surged 8.7% after the restaurant chain hiked its full-year profit outlook and posted stronger-than-anticipated quarterly results.

Macy's (M) posted quarterly profit of $2.05 a share on revenue of $9.35 billion, beating the average analyst earnings estimate of $1.99 a share on revenue of $9.3 billion as the company benefited from robust holiday sales. The company is predicting same-store sales growth of about 3.5% in fiscal 2013. Shares added 2.8%.

RadioShack (RSH) reported a wider-than-expected quarterly loss and cautioned there is a possibility that it might have to resort to asset sales or close down stores to boost liquidity if its business does not show any improvement by next year. Shares rose 0.33% after slipping earlier following the earnings announcement.

Vivus (VVUS) reported a wider-than-expected fourth-quarter loss. Shares tumbled 12.3%.

-- Written by Andrea Tse and Joe Deaux in New York

>To contact the writer of this article, click here: Andrea Tse.

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