Stocks Gain As Bernanke, GDP Reassure Investors
Stocks posted big gains Friday after Fed Chairman Ben Bernanke delivered reassuring words on the economy and as U.S. growth turned out to be better than expected this spring.
The Dow Jones industrial average and other market barometers all gained more than 1 percent after the government slashed its estimate for second-quarter economic growth, but not by quite as much as economists had expected.
Likewise, Federal Reserve Chairman Ben Bernanke said in a speech that while the economic recovery remains tentative, the central bank remains ready to take extra steps to stimulate the economy if needed. He also reaffirmed his view that the economy would grow next year.
"It could have been worse, and because it wasn't, that was good news," said Alan Gayle, senior investment strategist for RidgeWorth Investments, based in Richmond, Va. "Clearly the bar is being lowered for what constitutes good news these days."
The market had a brief scare in midmorning after Intel Corp. lowered its revenue estimate. There, too, the news wasn't as bad as it could have been. Intel's shares edged higher after resuming trading since the company's new forecast wasn't as bad as the worst estimates circulating among analysts.
On the economic front, the Commerce Department reported that gross domestic product grew at a 1.6 percent rate in the April-to-June period. That's still way down from its earlier estimate of 2.4 percent but not as bad as the 1.4 percent expected by economists.
"These are terrible numbers," Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh, said. "But they weren't frighteningly horrible."
Yields on Treasurys, which help set interest rates on loans like mortgages, rose sharply as their prices fell. That could put upward pressure on mortgage rates, which are still at historic lows.
According to preliminary calculations, the Dow Jones industrial average rose 164.84, or 1.7 percent, to close at 10,150.65. The Standard & Poor's 500 Index rose 17.37, or 1.7 percent, to 1,064.59 and the Nasdaq composite index rose 34.94, or 1.6 percent, to 2,153.63.
Rising stocks outnumbered falling ones six to one on the New York Stock Exchange, where volume came to 1.1 million shares.
The yield on the 10-year Treasury note rose to 2.64 percent, well above the 2.50 percent it was trading at late Thursday.
(Copyright 2010 by The Associated Press. All Rights Reserved.)
