Thursday 18th July 2013
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Wall Street gained after Federal Reserve Chairman Ben Bernanke said there was no "preset course" for the central bank's bond-buying program, while better-than-expected results from companies including Bank of America also underpinned the mood.
"I emphasise that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course," Bernanke said today in prepared testimony before the House Financial Services Committee.
He also said improvements in the labour market were not yet sufficient to warrant a drop in stimulus.
"The jobs situation is far from satisfactory, as the unemployment rate remains well above its longer-run normal level, and rates of underemployment and long-term unemployment are still much too high," Bernanke said. "With unemployment still high and declining only gradually, and with inflation running below the Committee's longer-run objective, a highly accommodative monetary policy will remain appropriate for the foreseeable future."
In a Q&A session, the Fed chief said the bank still was expecting to slow its bond purchases later this year and end them next year as the recovery gathers momentum. Bernanke is scheduled to testify to the Senate Banking Committee on Thursday.
In late afternoon trading in New York, the Dow Jones Industrial Average was up 0.06 percent, the Standard & Poor's 500 Index rose 0.19 percent, while the Nasdaq Composite Index gained 0.07 percent. The S&P 500 was last at 1,679.43 and had earlier risen as high as 1,684.75, while the Dow was at 15,461.03 after earlier touching 15,502.00.
US Treasuries also gained on Bernanke's comments. Yields on the benchmark 10-year note dropped six basis points to 2.47 percent.
"The quantitative-easing policy is not on a preset course - that's resonating," George Goncalves, the head of interest-rate strategy at Nomura Holdings, one of the 21 primary dealers that trade directly with the Fed, told Bloomberg News.
"There's still some optionality about how they are going to do it and to what extent," Goncalves said. "The more they sound dovish is the more the market is pricing in that it may not be as big."
The latest US housing data provided a reminder of that the economic recovery is not without speed bumps. Housing starts unexpectedly fell 9.9 percent last month to a seasonally adjusted annual rate of 836,000 units, the lowest level since August last year and short of the 960,000 forecast.
"On the surface it doesn't look good, but we are confident that starts activity is still going to climb higher in the months to come," Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina, told Reuters.
Shares of Bank of America gained, last up 3.1 percent, after the largest US lender posted a bigger-than-expected jump in quarterly profit on cost cuts and increased trading revenue. Shares of Bank of New York Mellon also rose, up 1.5 percent, on better-than-expected earnings.
There were disappointments too. Shares of Mattel sank, last down 7.2 percent, after the toymaker posted profit that fell short of forecasts amid declining Barbie sales.
In Europe, the benchmark Stoxx 600 Index added 0.6 percent. The UK's FTSE 100 index advanced 0.2 percent, France's CAC 40 rose 0.5 percent, while Germany's DAX increased 0.7 percent.
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