Stocks surge after Bernanke eases fear of stimulus drawback

The Federal Reserve will continue supporting the U.S. economy and that put smiles on the faces of investors on Wall Street on Thursday in New York.

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The Federal Reserve will continue supporting the U.S. economy and that put smiles on the faces of investors on Wall Street on Thursday in New York.

NEW YORK — Call it the Bernanke Boost.

The stock market, which has been marching higher for a week, got extra fuel Thursday after Federal Reserve Chairman Ben Bernanke said late Wednesday that the central bank will keep supporting the economy "for the foreseeable future."

The Dow Jones Industrial Average and Standard & Poor's 500 surged to all-time highs. And the yield on the 10-year Treasury note continued to decline as investors bought bonds. Stocks that benefit most from a continuation of low interest rates, such as home builders, notched some of the biggest gains.

The U.S. economy needs help because unemployment is high, Bernanke said. His remarks seemed to ease investors' fears that the central bank will pull back on its economic stimulus too quickly. The Fed is buying $85 billion a month in bonds to keep interest rates low and to encourage spending and hiring.

"It's back to the old accommodative Fed, so the markets are happy again," said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.

The market pulled back last month after Bernanke laid out a timetable for the Fed to wind down its bond-buying program. He said the central bank would likely ease back on its monthly purchases if the economy strengthened sufficiently.

On Thursday, the S&P 500 index jumped 22.40 points, or, 1.4 percent, to 1,675.02, surpassing its previous record close of 1,669, set May 21. The index rose for a sixth straight day, its longest streak in four months.

The Dow rose 169.26 points, or 1.1 percent, to 15,460.92, above its own all-time closing high of 15,409, set May 28.

The Nasdaq composite rose 57.54 points, or 1.4 percent, to 3,578.30.

In government bond trading, the yield on the 10-year note fell to 2.57 percent from 2.63 percent Wednesday. The yield was as high as 2.74 percent Friday after the government reported strong hiring in June. Many traders took that report as a signal that the Fed would be more likely to slow its bond purchases sooner rather than later.

The Fed has also said it plans to keep short-term rates at record lows, at least until unemployment falls to 6.5 percent.

Home builders, which are sensitive to the outlook for interest rates, were big gainers.

D.R. Horton rose $1.93, or 9.2 percent, to $22.98, and Lennar Group climbed $2.88, or 8.3 percent, to $37.44.

The housing market has benefited from low interest rates because they help make mortgages cheaper.

"The Bernanke qualifications have taken the interest rate risk off the table, and now it's really about what will earnings say," said Jonathan Lewis, chief investment officer at Samson Capital Advisors.

The price of gold gained for a fourth straight day, climbing $32.70, or 2.6 percent, to $1,280.10 an ounce. Gold has rebounded this week after falling close to a three-year low.

Stocks surge after Bernanke eases fear of stimulus drawback 07/11/13 [Last modified: Thursday, July 11, 2013 10:54pm]

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