Stocks Ride Rate Wave to Higher Close
NEW YORK (
) -- Stocks closed higher Wednesday after
Federal Reserve
Chairman
Ben Bernanke testified on Capitol Hill that interest rates will remain low.
The Dow Jones Industrial Average
gained 92 points, or 0.9%, to close at 10,374. The
S&P 500
added 11 points, or 1%, to 1105, while the
Nasdaq
improved by 23 points, or 1%, to finish at 2236.
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In his semiannual report on economic and monetary policy before the House Financial Services Committee, Bernanke said government responses helped stabilize the economy, but warned any additional "sustained recovery" will depend on private-sector growth.
Although consumer spending has improved, Bernanke also said concerns about the housing and labor markets remain. With expectations for subdued inflation remaining, Bernanke repeated a now-familiar phrase, also echoed in the Fed's already released policy report, saying that the central bank's key
will remain at "exceptionally low levels ... for an extended period."
The testimony lifted shares across the financial sector.
JPMorgan Chase
(JPM) - Get Report
and
Bank of America
(BAC) - Get Report
were the Dow's best performers with shares up 2.4% and 2.5%, respectively.
Shares of
Citigroup
(C) - Get Report
and Bank of America were the most heavily traded on the
New York Stock Exchange
, which had listed volume of 4.2 billion. The Dow, meanwhile, was seeing volume of 181 million, compared with an average volume of 200 million.
In the afternoon session, members of the Oversight and Government Reform Committee grilled
Toyota
(TM) - Get Report
President Akio Toyoda on the automaker's safety problems. The stock finished 4% higher.
The U.S. Treasury saw respectable demand for its $42 billion auction of five-year notes. The auction had a bid-to-cover ratio of 2.75 and a high yield of 2.395%. Indirects, or foreign buyers, took less than half of the bids, at 41%.
The benchmark 10-year note was strengthened 1/32, diluting the yield to 3.685% while the five-year note was largely unchanged with a yield of 2.351%. The long-dated 30-year bond rose 7/32, weakening the yield to 4.620%.
Wednesday saw stocks trading in positive territory for most of the day's session, despite the Commerce Department's report showing
new-home sales slumped 11.2% in January, reaching a seasonally adjusted annual rate of 309,000 units. Economists had expected sales to rise to 355,000, up from a revised 342,000 the month prior.
Stuart Hoffman, chief economist at PNC Financial, wrote that the data were showing the "effects of severe winter weather," adding that a "very cold January for the eastern U.S. likely contributed to anemic new home sales for the month."
Michael Pento, senior market strategist at Delta Global Advisors, admitted surprise that investors so easily shrugged off the housing data. He said market participants were relieved that Bernanke continued signaling for low interest rates and remained insistent that the Fed's recent discount rate hike did not represent a shift in the monetary policy outlook.
"That's the crux of why the market's rallying," Pento says. "There was a lot of feeling or fretting that the discount rate presaged a sooner, faster reversal of the monetary stance."
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While Bernanke's statement echoed previous language, and though many realize the Fed will have to tighten monetary policy in the future, Pento added that the market "got reassurance the Fed exit strategy is not going to start any time soon."
Elsewhere, in an expected move, the
Securities and Exchange Commission
voted 3-2 to adopt a so-called "alternative" uptick rule. The move is meant to restrict short sales when a stock drops at least 10% during a session, allowing short selling if the price is above the current national best bid, according to a statement from Chairman Mary Schapiro.
Citigroup is reportedly in talks to sell a hedge fund business with $4 billion in assets, according to a
Wall Street Journal
report. The stock gained 3%, to close at $3.45.
(GOOG) - Get Report
is the subject of a European antitrust probe investigating how it ranks search results.
Yahoo!
(YHOO)
, announcing a content partnership with
, said people will be able to access their personal Twitter feeds across Yahoo!'s products and properties. Shares surged 1.4%.
Regulators in China have stalled the sale of
General Motors'
Hummer brand, according to a report from
Reuters.
Ministry of Commerce officials turned down a bid by Sichuan Tengzhong Heavy Industrial Machinery, though both GM and Tengzhong were examining alternatives.
Pfizer
(PFE) - Get Report
shares improved 0.8% after news reports circulated that the Food and Drug Administration approved a new vaccine to treat pneumonia. The vaccine, known as Prevnar 13, was brought into the Pfizer stable of drugs from its acquisition of Wyeth.
In earnings news, homebuilder
Toll Brothers
(TOL) - Get Report
narrowed its loss in the first quarter and exceeded analyst estimates. Shares shed 12 cents, or 0.6%, at $18.78.
In the consumer space, jeweler
Zale
(ZLC)
, women's apparel dealer
Chico's
(CHS) - Get Report
and luxury retailer
Saks
(SKS)
also beat bottom-line forecasts.
The greenback was trading lower against a basket of currencies with the dollar index down by nearly 0.1%.
In a morning release, the Energy Information Administration estimated crude oil stockpiles rose by 3 million barrels last week, which outpaced a forecast from Platts calling for a 2 million-barrel build. Gasoline inventories, which were projected to fall by 200,000 barrels, shed 900,000 barrels. At the same time, distillate stocks decreased by 600,000 barrels, though analysts had anticipated a steeper 1.56 million barrel drop.
Crude oil for April delivery gained $1.14, or 1.4%, to settle at $80 a barrel, while the April
contract lost $6, or 0.9%, to settle at $1,097.20 an ounce.
-- Written by Sung Moss and Melinda Peer in New York
.
