Federal Reserve Chairman Ben Bernanke said what investors wanted to hear Friday, that the economy is indeed on the verge of recovery, and they responded with a rally that sent the major indexes to new highs for the year.
NEW YORK (AP) — Federal Reserve Chairman Ben Bernanke said what investors wanted to hear, that the economy is indeed on the verge of recovery, and they responded with a rally that sent the major indexes to new highs for the year.
The Dow Jones industrials shot up 155 points Friday, closing above 9,500 for the first time since Nov. 4, and all the big indexes finished with gains of more than 1.5 percent. Meanwhile, Treasury prices tumbled, pushing yields sharply higher, as investors no longer felt they needed the safety of government debt.
The stock market’s gains were broad, reaching across all industries, but the biggest jumps came from energy, industrial and material stocks as oil and commodities prices soared. Bank stocks also rose sharply.
“The prospects for a return to growth in the near term appear good,” Bernanke said at an annual Fed conference in Wyoming. He did warn, however, that lending is not back to normal, and that the difficulty consumers and businesses are having obtaining loans will be a challenge.
A bigger-than-expected jump in home sales also gave stocks a boost and helped send bonds lower. The National Association of Realtors said sales of existing homes rose 7.2 percent to a seasonally adjusted annual rate of 5.24 million in July, from a pace of 4.89 million in June.
It was the fourth straight monthly increase and the highest level of sales since August 2007. The rise in sales came amid a sharp decline in home prices.
The day’s news jump-started a listless market that has been marked by choppy trading this week amid mixed economic news and light summer volume.
Though Bernanke’s positive assessment on the economy was encouraging, the market’s challenges, including rising unemployment and sluggish consumer spending, are certainly far from over. The market appears to be on an upward trajectory, but analysts cautioned that stocks will likely bounce around through at least the rest of the summer.
“The news isn’t going to be all good from here on out,” said Jordan Smyth, managing direct at Edgemoor Investment Advisors in Bethesda, Md.
According to preliminary calculations, the Dow rose 155.91, or 1.7 percent, to 9,505.96. The Standard & Poor’s 500 index rose 18.76, or 1.9 percent, to 1,026.13, while the Nasdaq composite index rose 31.68, or 1.6 percent, to 2,020.90.
About four stocks rose for every one that fell on the New York Stock Exchange where volume came to 1.48 billion shares.