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Stocks End Higher After Bernanke Comments
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CNBC.com Writer
Stocks recovered from their afternoon lows to close higher Wednesday after Ben Bernanke said the Fed may look to reinvest in mortgage backed securities to provide additional support to the weak housing market.
Stocks had shaved their gains earlier after the Fed slashed its growth forecasts, while raising unemployment projections and following a report that said the sixth tranche of loans to Greece may not be paid until after Greek referendum is held.
The Dow Jones Industrial Average rallied 178.08 points, or 1.53 percent, to close at 11,836.04, led by BofA [BAC
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The S&P 500 gained 19.62 points, or 1.61 percent, to end at 1,237.90. The Nasdaq jumped 33.02 points, or 1.27 percent, to finish at 2,639.98. However, both indexes are still in negative territory for the year.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 33.
All 10 S&P sectors closed higher, led by energy and utilities.
“Growth is not all that strong and overseas trends are adverse, so I think [the Fed] is concerned that things could not only weaken in the next year, but also longer term,” said Bruce McCain, chief investment strategist at Key Private Bank.
The Fed left interest rates unchanged and announced that they are holding off on any new actions to aid the economy, but left open the possibility of taking further steps in the near future.
“There were not a lot of surprises here—a lot of the language was similar to the last meeting,” said Scott Brown, chief economist at Raymond James.
“Europe is going to remain important and [their problems] are not going to go away anytime soon,” added Brown. “The ECB meeting tomorrow with the new President there will be interesting to watch…it will be a fairly smooth transition.”
In addition, the Fed cut its growth forecast to between 1.6 and 1.7 percent for 2011, a full percentage point lower than their projections from June.
The Fed expects the unemployment rate to remain largely unchanged at the current 9.1 percent level this year and predicts it will fall between 8.5 and 8.7 percent next year. In June, the Fed had predicted unemployment would drop next year to as low as 7.8 percent.
Meanwhile, the EU and IMF said they will not release an 8 billion euro payment to Greece until the country holds a referendum on the EU's latest bailout program, according to sources from the EU/IMF. Without the payment, Greece could face bankruptcy.
The G20 meeting is scheduled to take place in Cannes later this week, which Greek Prime Minister George Papandreou is expected to attend.
Among earnings, Comcast [CMCSA
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Rival Time Warner [TWX
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MasterCard [MA
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] jumped to hit an all-time high after the credit-card provider topped earnings estimates on double-digit increases in volumes.
Meanwhile, Teva Pharmaceutical [TEVA
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Kraft [KFT
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Intel [INTC
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MF Global failed to protect customer accounts by keeping them separate from its own funds, said a top U.S. exchange regulator, another shock for commodity markets scrambling to contain fallout from the brokerage's bankruptcy. MF Global is now trading under the ticker symbol MFGLQ [MFGLQ
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On the economic front, U.S. private-sector employers added 110,000 jobs in October, according to the ADP National Employment report. And the number of planned layoffs at U.S. firms dropped to their lowest levels in four months in October, according to the Challenger, Gray & Christmas report.
The employment reports come two days ahead of the key government non-farm payroll data, which is expected to show the economy created 95,000 jobs last month.
“Employment probably muddles along but without much strength—if we avoid disappointment, that’s good,” said McCain.
Weekly mortgage applications rose last week, as demand for both purchases and refinancing gained, according to the Mortgage Bankers Association.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
On Tap This Week:
THURSDAY: Jobless claims, productivity and costs, Fed's Lockhart speaks, factory orders, ISM non-mfg index, G20 Summit, chain-store sales, Groupon IPO prices; Earnings from Unilever, Kellogg, AIG, CBS
FRIDAY: Non-farm payroll report
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