Bernanke word bounces stocks
NEW YORK – The stock market keeps getting tossed around by the Fed.
Stocks opened lower Friday but reversed course after a letter surfaced from Federal Reserve Chairman Ben Bernanke suggesting there was room for the central bank to do more to help the economy.
“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke wrote to California Rep. Darrell Issa, a Republican, in a letter obtained by the Wall Street Journal.
The Dow Jones industrial average was down 30 points at its low but finished 100.51 points higher, at 13,157.97, its first gain all week. It was still the first losing week for the Dow since early July.
The Standard & Poor’s 500 index rose 9.05 to 1,411.13 but also snapped a six-week winning streak. The Nasdaq composite index rose 16.39 to 3,069.79, ending five straight weeks of gains.
In a typically slow August, without much else to influence trading, investors have grasped for hints about what the Fed might do.
On Wednesday afternoon, investors pushed stocks higher after the Fed released meeting minutes that appeared to signal it was ready to take more action to prop up the economy.
On Thursday, stocks declined when a Fed regional bank president cast doubt on the idea, saying in an interview with CNBC that the economic recovery appeared to be gaining strength.
Then on Friday, Bernanke shook up the market again. His letter was in response to questions from Issa, the head of the House oversight committee, who had asked whether it was premature to consider additional steps.
The Fed has several options, including buying bonds, as it has done twice since the 2008 financial crisis, to try to lower interest rates and drive investors into the stock market.
For the most part, the market has been hard to read this month. Without much news, trading volume has been low, and investors haven’t had much conviction either way about the economy.
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