Bush, Bernanke speeches drive market
NEW YORK – Stocks ran up big gains Friday as investors took comments from President Bush and Federal Reserve Chairman Ben Bernanke as reassuring signs that Wall Street wouldn’t be left to deal with problems in the mortgage and credit markets on its own. The Dow Jones industrials rose more than 150 points.
Investors initially balked early in Friday’s session when comments from Bernanke didn’t indicate a cut in the benchmark federal funds rate was imminent. However, they seemed to move past some of their initial disappointment and concentrate on comments that the Fed would step in if needed.
Bernanke, speaking at the Fed’s annual conference in Jackson Hole, Wyo., said the central bank will “act as needed” to prevent the credit crisis from hurting the national economy.
The major indexes fluctuated but by midday extended their gains after President Bush spoke about details of a plan to help borrowers facing trouble paying their mortgages.
“You’ve got all the speeches working for the market here,” said Michael Church, portfolio manager at Church Capital Management in Philadelphia. “What we’ve seen in the last few weeks is that Ben Bernanke and the Federal Reserve are paying attention to what’s going on. They will help correct the credit markets. For now, we’re in a trading range and we have to sort through this mess.”
In late afternoon trading, the Dow rose 159.00, or 1.20 percent, to 13,397.73.
Broader stock indicators also rose. The Standard & Poor’s 500 index rose 19.87, or 1.36 percent, to 1,477.51, and the Nasdaq composite index rose 32.47, or 1.27 percent, to 2,597.77.
Bond prices fell. The yield on the 10-year Treasury note, which moves inversely to its price, rose to 4.53 percent from 4.51 percent late Thursday. The U.S. bond market closed early, at 2 p.m. EDT ahead of the holiday weekend, and will be closed Monday along with the stock markets.
Since the stock market started tumbling in late July on fears that problems in mortgage and corporate lending would lead to a credit freeze and hurt the economy, the Fed has injected tens of billions of dollars into the banking system and lowered its discount rate – the charge on its loans to commercial banks.
But the Fed hasn’t yet said it will lower the benchmark federal funds rate, and Wall Street’s uncertainty over what the central bank will do next has kept the markets volatile.
The Fed’s next meeting is Sept. 18 and some investors had expected the central bank might hint at or even go through with a rate cut before then.
Economic news, as Bernanke indicated Friday, appeared less relevant than normal as investors remained focused on upheaval in the credit market and mortgage concerns.