U.S. stocks gain on Bernanke comments; Dow up 0.77%

Written by HMH | August 24, 2012 | 0 |

Forexpros – U.S. stock prices rose on Friday after Federal Reserve Chairman Ben Bernanke told a U.S. lawmaker the U.S. central bank has the scope to loosen monetary policy.

At the close of U.S. trading, the Dow Jones Industrial Average ended up 0.77%, the S&P 500 index was up 0.65% while the Nasdaq Composite index was up 0.54%.

In a letter to a U.S. congressmen, Bernanke said the Federal Reserve had scope for further policy action, which sent stocks rising.

Federal Reserve officials have said they cannot rule out stimulating the U.S. economy with a new round of quantitative easing.

With quantitative easing, the Fed buys bonds such as Treasury holdings or mortgage-backed securities from banks, pumping the financial system full of liquidity and weakening the dollar to spur recovery.

Stocks rise under such policy as a side effect, and Bernanke’s comments rekindled expectations for Fed intervention.

Elsewhere, the Census Bureau reported earlier that U.S. durable goods orders rose to 4.2% in July from 1.6% in June, whose figure was revised up from 1.3%.

Analysts had expected durable goods orders to rise 2.4% last month.

Meanwhile in Europe, market talk that the European Central Bank will buy Spanish and Italian government debt bolstered stocks though a German court is still deciding if participating in European bailout measures violates the country’s law.

Bernanke’s comments, however, served as the market’s chief driver.

Leading Dow Jones Industrial Average gainers included Verizon Communications, up 2.20%, American Express, up 1.86%, and Kraft Foods, up 1.50%.

The Dow Jones Industrial Average’s worst performers included Intel, down 0.52%, Hewlett-Packard, down 0.34%, and Caterpillar, down 0.22%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.21%, France’s CAC 40 rose 0.02%, while Germany’s DAX 30 finished up 0.31%. Meanwhile, in the U.K. the FTSE 100 rose 0.01%.

Investors are planning for the Federal Reserve’s annual symposium at Jackson Hole, Wyoming next week, where Bernanke and ECB President Mario Draghi will speak.