The Week on Wall Street: More Sound and Fury
Stocks rallied on Friday after Fed Chairman Bernanke acknowledged expanding trouble in the credit markets.
"Bottom line, he reaffirmed the Fed's bias towards easing," said Mark Zandi, chief economist at Moody's Economy.com. "I do think he'll get more economic data, and the anecdotes will add up to some Fed easing by the September meeting ... I don't see any way around that."
The head of the central bank gave a blunt assessment of the credit situation, saying financial stress is not confined to the mortgage markets. The Fed was prepared to act if needed, said Bernanke, who stopped short of committing to an interest-rate cut.
President Bush's plans for reforms to help homeowners with subprime mortgages avoid default also contributed to positive market sentiment. Meanwhile, investors were encouraged by economic data that showed an increase in personal income and spending, but tame inflation numbers.
Peter Kang is a markets writer at CNBC.com and can be reached at firstname.lastname@example.org.