Talks by Fed chief, Bush boost stocks
The stock market closed out another erratic week with a big gain Friday after investors took comments from President Bush and Federal Reserve Chairman Ben S. Bernanke as signs that Wall Street wouldn’t be left to deal with problems in the mortgage and credit markets on its own.
Investors balked early in Friday’s session when Bernanke didn’t suggest that a cut in the benchmark federal funds rate was imminent. But the market then appeared to focus on comments by the chairman that the Fed would step in if needed.
Bernanke, speaking at the Fed’s annual conference in Jackson Hole, Wyo., said the central bank would “act as needed” to prevent the credit crisis from hurting the national economy.
The major indexes fluctuated but held their gains after President Bush spoke about details of a plan to help borrowers having trouble paying their mortgages.
“You’ve got all the speeches working for the market here,” said Michael Church, portfolio manager at Church Capital Management in Philadelphia. “What we’ve seen in the last few weeks is that Ben Bernanke and the Federal Reserve are paying attention to what’s going on. They will help correct the credit markets. For now, we’re in a trading range and we have to sort through this mess.”
The Dow rose 119.01 points, or 0.9%, to 13,357.74.
Broader stock indicators also rose. The Standard & Poor’s 500 index rose 16.35, or 1.1%, to 1,473.99. The Nasdaq composite index rose 31.06, or 1.2%, to 2,596.36.
The Russell 2,000 index of smaller companies rose 9.75 points, or 1.2%, to 792.86.
Advancing issues outnumbered decliners by about 7 to 1 on the New York Stock Exchange. Volume was light as the three-day Labor Day holiday weekend approached.
For the week, the Dow fell 0.2%, the S&P; 500 slipped 0.4%, Nasdaq gained 0.8% and the Russell 2,000 fell 0.8%
Treasury yields rose Friday. The benchmark 10-year Treasury note climbed to 4.55% from 4.5% late Thursday.
The dollar rose against the yen and the euro, while gold prices climbed.
Oil futures rose 68 cents to $74.04 per barrel on the New York Mercantile Exchange.
Since the stock market started tumbling in late July on fears that problems in mortgage and corporate lending could hurt the economy, the Fed has injected tens of billions of dollars into the banking system and lowered its discount rate -- the charge on its loans to commercial banks. But the Fed hasn’t said it will lower the federal funds rate, and Wall Street’s uncertainty over what the central bank will do next has kept the markets volatile. The Fed’s next meeting is Sept. 18.
Bush’s comments that the nation’s economy can “weather any turbulence” in what he termed a period of transition for the financial markets appeared to help reassure investors. He outlined proposals to assist borrowers in trouble from a pullback in the housing market and credit problems.
Economic news Friday appeared less relevant than normal as investors remained focused on the credit crisis.
The Commerce Department reported that a key measure of consumer prices rose 1.9% in July from a year earlier, a reading within the Fed’s comfort range. The department also said factory orders jumped 3.7% in July, more than expected.
Church said the market was helped by Friday’s economic figures as well as a stronger-than-expected reading on second-quarter gross domestic product released Thursday.
“The consumer has been in the cross hairs of the bears for a while now,” he said, referring to concerns that a pullback in consumer spending will upend U.S. growth. “I think this helps clarify a lot of the situation. The news from the consumer is good.”
In other market highlights:
* ITT jumped $3.40, or 5.3%, to $67.99. The engineering technology company signed a $1.8-billion contract to overhaul the U.S. air traffic-control system with satellite-based technology.
* Toyota Motor gained $2.39, or 2.1%, to $115.68 after the automaker released an ambitious sales forecast for 2009.
* Dell slid 21 cents to $28.25. The computer maker reported a 46% rise in second-quarter profit, but analysts were concerned about a restructuring plan.
* Accredited Home Lenders soared $2.74, or 43%, to $9.05 after a private equity firm that had withdrawn its bid for the mortgage company came back with a lower offer.
* Cost Plus plunged $1, or 20%, to $4. The home furnishing products retailer projected a wider-than-expected fiscal third-quarter loss.
* Stocks surged overseas. Key indexes climbed 2.6% in Japan, 2.1% in Hong Kong, 1% in Shanghai, 1.5% in Britain, 1.6% in Germany and 1.2% in France.
