Stocks surge after Bernanke allays concerns

He says US economy still requires Fed's easy-money policy
2013-07-12T00:00:00Z Stocks surge after Bernanke allays concernsThe Associated Press The Associated Press
July 12, 2013 12:00 am  • 

NEW YORK - Call it the Bernanke Boost.

The stock market, which has been marching higher for a week, got extra fuel Thursday after Federal Reserve Chairman Ben Bernanke said the central bank will keep supporting the economy.

The Dow Jones industrial average and Standard & Poor's 500 surged to all-time highs.

The yield on the 10-year Treasury note continued to decline as investors bought bonds.

Stocks that benefit most from a continuation of low interest rates, such as homebuilders including D.R. Horton Inc. and Lennar Corp., notched some of the biggest gains. Low interest rates help make mortgages cheaper.

The chairman made the comments in a speech late Wednesday after U.S. markets had closed, saying the economy needs the Fed's easy-money policy "for the foreseeable future."

The U.S. economy needs help because unemployment is high, Bernanke said.

His remarks seemed to ease investors' fears that the central bank will pull back on its economic stimulus too quickly.

The Fed is currently buying $85 billion a month in bonds to keep interest rates low and to encourage spending and hiring.

Stock index futures rose overnight. Stocks surged when the market opened Thursday and stayed high for the rest of the day.

The S&P 500 index jumped 22.40 points, or 1.4 percent, to 1,675.02, surpassing its previous record close of 1,669 from May 21. The index rose for a sixth straight day, its longest streak in four months.

The Dow rose 169.26 points, or 1.1 percent, to 15,460.92, above its own all-time closing high of 15,409 set May 28.

The Nasdaq composite rose 57.55 points, or 1.4 percent, to 3,578.30, its highest level in nearly 13 years.

In government bond trading, the yield on the 10-year note fell to 2.57 percent from 2.63 percent Wednesday.

The yield was as high as 2.74 percent Friday after the government reported strong hiring in June. Many traders took that report as a signal that the Fed would be more likely to slow its bond purchases sooner rather than later.

The Fed has also said it plans to keep short-term rates at record lows, at least until unemployment falls to 6.5 percent.

Bernanke emphasized Wednesday that the level of unemployment is a threshold, not a trigger.

The central bank might decide to keep its benchmark short-term rate near zero even after unemployment falls that low.

The price of gold gained for a fourth straight day, climbing $32.50, or 2.6 percent, to $1,279.90 an ounce. Gold has rebounded this week after falling close to a three-year low.

Gold is rising because the prospect of continued stimulus from the Fed could weaken the dollar and increase the risk of inflation. That, in turn, increases the appeal of gold as an alternative investment.

The rise in gold helped mining stocks, including Phoenix-based Freeport-McMoRan Copper & Gold Inc.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Activate

Latest Video

More videos

Rich Rod press conference after UNLV

Rich Rodriguez and several players take questions about their win against UNLV.


Follow the Arizona Daily Star

Featured businesses

View more...

Deals, offers & events

View more...