Stocks Close Modestly Higher
Stocks rose modestly Wednesday after investors bobbed and weaved with every word of new Federal Reserve Chairman Ben S. Bernanke’s testimony before Congress.
The market seesawed through Bernanke’s first monetary policy testimony before the House Financial Services Committee. Stocks fell as he warned of more rate hikes, rose as he reassured investors about the spread between long- and short-term bond yields, then turned mixed as he expressed concern about federal budget deficits. The major indexes crept upward after his debut ended.
Bernanke said inflation was contained, but warned it could tick higher. He left the door open to more interest rate hikes. He was upbeat about the economy, saying the latest employment and consumer spending data “suggests that the economic expansion remains on track.”
The market has recently been hypersensitive to any hints about future Fed rate hikes, said Brian Gendreau, investment strategist for ING Investment Management.
Bernanke’s testimony suggests that “if the Fed is going to err, it will be on the side of more rate hikes,” he said.
The Dow Jones industrial average rose 30.58 points, or 0.3%, to 11,058.97 after rising 136 points Tuesday.
Broader stock indicators were slightly higher. The Standard & Poor’s 500 index rose 4.47 points, or 0.4%, to 1,280, and the Nasdaq composite index rose 14.26, or 0.6%, to 2,276.43.
Advancing issues outnumbered declining issues by roughly 2 to 1 on the New York Stock Exchange.
Bonds were little changed, with traders satisfied by Bernanke’s commitment to stay vigilant against inflation. The benchmark 10-year U.S. Treasury note yielded 4.6%, down from 4.61% on Tuesday.
The advance by stocks was slight because “we had a big move [Tuesday] and we need to digest it,” said Greg Church, chief investment officer of Church Capital Management in Yardley, Pa.
Stocks may continue to sway until it becomes clear when the Fed will stop raising interest rates, said Richard Madigan, global investment strategist at JP Morgan Private Bank. “There’s a jumpiness in the markets that we’re going to, unfortunately, live with a little while longer,” he said.
Crude oil futures fell for the fourth straight day, dropping below $59 a barrel after U.S. government inventory data showed increasing supplies of gasoline and oil. Light crude fell by $1.92 to settle at $57.65 a barrel in New York trading. Gold futures dropped $6.20 to $539.70 an ounce, as slumping fuel prices reduced the metal’s appeal as a hedge against inflation.
In other market highlights:
* A gauge of raw material producers in the S&P; 500 fell 0.3% for the second-steepest decline among 10 industry groups. Freeport-McMoRan Copper & Gold lost $2.21 to $50.27 and Newmont Mining dropped 34 cents to $54.82.
* Biogen Idec, a drug maker that is testing multiple sclerosis drug Tysabri in partnership with Ireland’s Elan, gained $1.34 to $45.72, to help lift the Nasdaq. The companies said that the U.S. Food and Drug Administration would allow a clinical trial of the drug to resume.
* Wells Fargo rose 84 cents to $63.49 and Anheuser-Busch rose 71 cents to $41.68 after billionaire investor Warren Buffett’s holding company, Berkshire Hathaway, disclosed significant stakes in the companies Tuesday as part of required filings detailing Berkshire’s $42.7-billion stock portfolio. The Securities and Exchange Commission filings show that Berkshire has nearly doubled its stake in Wells Fargo since last May.
* DaVita, an El Segundo-based dialysis service company, rose $3.88 to $59.21 as it reported fourth-quarter earnings.
