U.S. stocks rose on Wednesday,with major indexes posting their best daily gains since early January,as Federal Reserve Chairman Ben Bernanke remained steadfast in supporting the Fed’s stimulus policy and data pointed to economic improvement.
In a second day before a congressional committee,Bernanke defended the Fed’s buying of bonds to keep interest rates low to boost growth. The market’s jump of more than 1 percent also came on better-than-expected data on business spending plans and the housing market.
Bernanke’s remarks helped the market rebound from its worst decline since November and put the S&P 500 index back above 1,500,a closely watched level that has been technical support until recently. The Dow Jones industrial average closed at a level not seen since 2007 as it again pulled within striking distance of an all-time high.
Speaking before the House Financial Services Committee,Bernanke downplayed signs of internal divisions at the Fed,saying the policy of quantitative easing,or QE,has the support of a “significant majority” of top central bank officials.
Bernanke removed a headwind from markets arising from concerns the Fed’s quantitative easing might end earlier than anticipated. Doubts about the Fed’s intentions had broken a seven-week streak of gains by stocks.
“The Fed continues to encourage risk-taking in markets,which is a powerful tool that makes the danger not being long stocks,not in being too long,” said Tom Mangan,a money manager at James Investment Research Inc in Xenia,Ohio.
The Dow Jones industrial average was up 176.32 points,or 1.27 percent,at 14,076.45. The Standard & Poor’s 500 Index was up 19.07 points,or 1.27 percent,at 1,516.01. The Nasdaq Composite Index was up 32.61 points,or 1.04 percent,at 3,162.26.
Pending home sales jumped 4.5 percent in January,three times the rate of growth that had been expected. While orders for durable goods fell more than expected in January,non-defense capital goods orders excluding aircraft – a closely watched proxy for business spending plans – showed the biggest gain since December 2011..
About 74 percent of stocks traded on the New York Stock Exchange closed higher while 64 percent of Nasdaq-listed shares closed up.
The S&P turned very slightly higher on the week,recovering from the index’s biggest daily drop since November on Monday. That drop came on concerns over Italy’s election,as well as over sequestration – U.S. government budget cuts that will take effect starting on Friday if lawmakers fail to reach an agreement on spending and taxes.
The index had climbed 6.3 percent for the year before pulling back on concerns about Fed policy and inconclusive elections in Italy,which rekindled fears of a new euro zone debt crisis.
“While the rally remains intact and there are reasons to be long-term bullish here,there are also reasons to not be surprised if we get a correction,” said Mangan,who helps oversee $3.7 billion.
In earnings news,Priceline.com gained 2.6 percent to $695.91 after reporting adjusted earnings that beat expectations. TJX Cos Inc jumped 2.5 percent to $44.75 after the retail chain operator posted higher fourth-quarter results.
The S&P retail index climbed 1.6 percent.
Target Corp offered a cautious outlook for consumer spending in 2013 following a weak holiday quarter. The stock dipped 1.1 percent to $63.32.
First Solar Inc plunged 14 percent to $27.04 after failing to give a full-year earnings and sales outlook,though it also swung to a quarterly profit.
Groupon Inc plunged 21 percent to $4.70 after the bell after reporting its fourth-quarter results.
With 93 percent of the S&P 500 companies having reported results so far,69.5 percent beat profit expectations,compared with a 62 percent average since 1994 and 65 percent over the past four quarters,according to Thomson Reuters data.
Fourth-quarter earnings for S&P 500 companies are estimated to have risen 6.2 percent,according to the data,above a 1.9 percent forecast at the start of the earnings season.
About 6.23 billion shares changed hands on the New York Stock Exchange,the Nasdaq and NYSE MKT,slightly below the daily average so far this year of about 6.48 billion shares.