The Dow Jones industrial average ended another turbulent week with a strong gain Friday after Federal Reserve Chairman Ben Bernanke said the U.S. was headed for long-term economic growth. It was the first winning week in a month.
Bernanke announced no new economic stimulus measures during his speech at a conference in Jackson Hole, Wyo., as some investors had hoped. He did leave open the possibility of more action if another recession looks likely.
Indexes fell sharply as the speech was released at 10 a.m. and it became clear that Bernanke was not promising additional support of the economy. The Dow Jones industrial average was down about 78 points shortly before the speech started and slumped as many as 220 points shortly after Bernanke started speaking. It recovered within an hour and stayed higher the rest of the day.
Boeing Co. rose 2.8 percent, the most of the 30 stocks that make up the Dow. Tiffany & Co. rose 9 percent, the most of any of the 500 stocks in the S&P index, after the luxury retailer raised its profit forecast for the year.
In his speech, Bernanke focused on the long-term strengths of the U.S. economy. He said they “do not appear to have been permanently altered by the shocks of the past four years.” That shot of optimism helped lift markets.
“In the American economy, the only thing that’s really lacking right now is confidence,” said David Kelly, chief market strategist at JPMorgan funds. “People who understand the limits of monetary policy also understand that the economy has what it takes to grow.”
The Fed has said it plans to keep short-term interest rates low until mid-2013. Low rates on investments like bonds make higher-risk bets such as stocks more attractive. At last year’s conference in Jackson Hole, Bernanke signaled the central bank would buy more government bonds to lower long-term interest rates.
sponsored Jargon is confusing, by definition. And the financial world has its own set of cryptic words.