U.S. stocks rose as Federal Reserve Chairman Ben S. Bernanke said he saw scope for further action, increasing speculation the central bank will act to boost economic growth.
Nine out of 10 groups in the S&P 500 rose, as consumer discretionary, industrial and technology stocks erased earlier losses. Parsippany-based Watson Pharmaceuticals. climbed 6 percent for the biggest gain in the benchmark gauge for U.S. stocks as its generic painkiller Lidoderm got approval from the Food and Drug Administration. QEP Resources jumped 6 percent after agreeing to buy North Dakota oil assets.
The S&P 500 added 0.7 percent to 1,411.13. The gauge fell 0.5 percent for the week. The Dow Jones Industrial Average rose 100.51 points, or 0.8 percent, to 13,157.97 today. Volume for exchange-listed stocks was 4.7 billion shares, 24 percent below the three-month average and the third-lowest level of the year.
It was confirmation of Bernankes commitment to potentially do something more if the economy appears it needs it, John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. That was reassuring to people who might have thought he was stepping back from that. He said, Its summer trading and volume is light so it doesnt take much to move the market. A little whiff of positive news was enough.
The S&P 500 had advanced for the past six straight weeks amid optimism that global central banks will take actions to stimulate growth. At the same time, trading volume and volatility have dropped this month as vacationing traders await policy clues from the Feds annual summit in Jackson Hole, Wyoming, and a European Central Bank meeting in September.
There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery, Bernanke said in an Aug. 22 letter to California Republican Darrell Issa, the chairman of the House Oversight and Government Reform Committee.
Minutes from the Federal Open Market Committees July 31- Aug. 1 meeting showed many members judged that more stimulus would likely be warranted fairly soon unless the pace of the recovery picks up. Bernanke will have an opportunity to clarify his views in a speech Friday at Jackson Hole, Wyo., where he signaled a second round of bond buying in 2010.
A report today showed demand for U.S. capital goods such as machinery and communications gear dropped in July by the most in eight months, indicating companies are pulling back on investment. Bookings for non-military capital equipment excluding planes slumped 3.4 percent, the Commerce Department report showed.
Global stocks fell earlier as two central bank officials said ECB President Mario Draghi may wait until Germanys Constitutional Court rules on the legality of Europes permanent bailout fund before unveiling full details of his plan to buy government bonds. With the court set to rule on Sept. 12, investors looking for Draghi to announce a definitive program at his Sept. 6 press conference might be disappointed, according to the officials.
German Chancellor Angela Merkel said at a joint press conference with Greek Prime Minister Antonis Samaras that Germany is ready to help the Greek government as it takes the necessary steps to resolve his countrys economic woes. Samaras will go to Paris for a meeting with French President Francois Hollande tomorrow after concluding his visit to Berlin today.
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Markets inch upward, await word from Bernanke