Bernanke Letter Gives Stocks A Lift To Close Rocky Week

The market made a U-turn Friday, with morning losses becoming gains thanks to Federal Reserve Chairman Ben Bernanke.

Two days after the release of the minutes from the central bank’slast monetary policy meeting, and a week ahead of a hotly-anticipated speech at the central bank’s annual conference in Jackson Hole, Wyoming, Bernanke made clear that the Fed still has the ability to give the market another shot in the arm. In a letter to Congressman Darrell Issa, the Fed chair said “[t]here is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery.” According to the Wall Street Journal, the California Republican posed a number of questions to Bernanke earlier this month, including whether further action at this time would be premature.

Recent economic signals have lent credence to the idea that the U.S. experienced a soft patch in the spring and early summer, rather than a downturn that put the country on a path back toward recession. Bernanke noted that the Fed’s policies must have a dose of foresight, given the lag with which monetary policy takes effect.

None of Bernanke’s remarks in the letter should come as much of a surprise, given that he has consistently maintained that the central bank is ready, willing and able to take further action should it deem such efforts necessary. The next Fed meeting is set for September 12-13.

Stocks got a shove higher from Bernanke’s letter, with the S&P 500 gaining 9 points, 0.6%, to 1,411 by the closing bell.  The Dow Jones industrial average added 101 points, 0.8%, to 13,158, while the Nasdaq rallied 16 points, 0.5%, to 3,070. Gold prices paused after a recent hot streak, dipping less than a tenth of a percent to $1,671 an ounce.

Madison Square Garden was among the day’s winners, rallying 2.9% on a stronger-than-expected earnings report, while software firm Autodesk was at the other end of the spectrum, diving 15.6% following a disappointing quarterand weak forecast.

source: forbes.com

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Posted in: Ben Bernanke,Stocks,The Fed,Wall Street Journal