Stocks finished higher in a volatile session Friday after after Bernanke's speech raised hopes that the Fed may consider further stimulus measures to boost the economy during an extended policy meeting next month.
The major indexes snapped a four-week losing streak and logged its best week in eight.
The Dow Jones Industrial Average rallied 134.72 points, or 1.21 percent, to finish at 11,284.54. The Dow plunged almost 220 points in a knee-jerk reaction immediately after Bernanke started his speech, but quickly pared their losses.
The S&P 500 gained 17.53 points, or 1.51 percent, to end at 1,176.80. The Nasdaq climbed 60.22 points, or 2.49 percent, to close at 2,479.85.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 36.
For the week, the Dow jumped 4.32 percent, the S&P surged 4.74 percent, while the Nasdaq soared 5.89 percent. Bank of America was the biggest gainer on the blue-chip index for the week, while Travelers was the only decliner.
All 10 S&P sectors were positive for the week, led by techs, while utilities gained the least.
Federal Reserve Chairman Ben Bernanke said the Fed is ready to use additional toolsto help the economy, but he stopped short of talk of another round of monetary easing. Bernanke said the Fed will meet for an extra day in September to discuss its options to provide additional monetary stimulus, among other topics.
While Bernanke expects growth to pick up in the second half of the year, if signs of a recovery fail to materialize in the near-term, the FOMC may consider additional policy tools at its September meeting.
“[Bernanke] outsmarted Wall Street,” said Todd Schoenberger, managing director of LandColt Trading. “His speech was plain vanilla and his plan was not to have a plan … He basically gave us a carrot so that we can hold our breath for the next month.”
This time last year, Bernanke laid the groundwork for the Fed's $600 billion bond-buying program to revive the economy, also known as QE2.
“I like that [the Fed] stood tall and didn’t give into the financial panic,” James Paulsen, chief investment strategist at Wells Capital Management told CNBC. “If they had acted, it would have been a sign that the Fed is nervous and it would have scared investors,” Paulsen added. “So I’m optimistic that this is a good outcome.”
