Bernanke's dovish tone on inflation signaled that the Fed won't be hiking rates. Speculation swirled about a possible buyout of Lehman Brothers
Lower oil prices also supported stocks, along with a forecast from Federal Reserve chairman Ben Bernanke that inflationary pressures should moderate this year amid slow economic growth.
The dollar index was higher. Gold futures were lower.
On Friday, the Dow Jones industrial average finished higher by 197.85 points, or 1.73%, at 11,628.06. The broader S&P 500 added 14.48 points, or 1.13%, to close at 1,292.20. The tech-heavy Nasdaq composite index rose 34.33 points, or 1.44%, to end the session at 2,414.71.
On the New York Stock Exchange, 22 stocks moved higher in price for every nine that fell, while the ratio was 20-8 positive on the Nasdaq. Trading activity remained relatively light, as has been the case for much of the week.
Looking ahead to next week, all eyes will on the U.S. housing data -- existing home sales for July on Monday, and the S&P/Case-Shiller June home price index on Tuesday -- to see if the beleaguered sector has finally reached bottom. Markets will also watch the Wednesday's durable goods data for July, to look for improvements in manufacturing.
On Friday, Bernanke signaled that he has no intention of raising interest rates although the inflation outlook remains uncertain.
In a speech at a Jackson Hole, Wyo. Fed conference, Ben Bernanke said the inflation outlook remains uncertain, U.S. economic growth is likely to be slow for while, and that the effects of the credit crunch are now becoming apparent. According to press reports, Fed officials are also discussing the fate of government-sponsored housing agencies Fannie Mae (FNM) and Freddie Mac (FRE).
In his speech Friday, Bernanke reiterated the Fed will act as necessary for "medium term" price stability. He noted the "financial storm" has yet to subside, and that the crisis is softening growth and raising the unemployment rate. He continues to expect moderation in inflation, and has been encouraged by the recent drop in commodity prices and the firmer dollar. But he also cautioned that the inflation outlook remains "highly uncertain."
The central bank chief noted the various liquidity measures the Fed has introduced and added they are to remain under review, but said the Treasury remains the best entity to deal with nonbank failures. His comments are consistent with an expectation for steady rates over the medium term, and the FOMC's rate decisions later this year and in early 2009 will be contingent on the growth and inflation data, as well as the status of the financial markets.
John Ryding, an economist for RDQ Economics in New York, said in a note Friday that "[o]ur reading of this speech is that Bernanke is dovish and has no intention of raising rates in the near term."
Most of the Nobel Prize-winning economists attending the annual economic symposium in Jackson Hole, Wyo., agree that the global financial system may not begin to recover for at least a year, with much deleveraging still necessary in the United States and Europe and many financial institutions needing to add capital or sell assets, but finding it more difficult, the Wall Street Journal reported.
Billionaire investor Warren Buffet said on a CNBC program that Freddie and Fannie "would have been gone long ago as private companies. But they are too big to fail with government backing. Something will happen soon. But they can't be bailed out by the private sector." Buffett blasted OFHEO's oversight of the two companies.
The dollar index was higher. Gold futures were lower.
On Friday, the Dow Jones industrial average finished higher by 197.85 points, or 1.73%, at 11,628.06. The broader S&P 500 added 14.48 points, or 1.13%, to close at 1,292.20. The tech-heavy Nasdaq composite index rose 34.33 points, or 1.44%, to end the session at 2,414.71.
On the New York Stock Exchange, 22 stocks moved higher in price for every nine that fell, while the ratio was 20-8 positive on the Nasdaq. Trading activity remained relatively light, as has been the case for much of the week.
Looking ahead to next week, all eyes will on the U.S. housing data -- existing home sales for July on Monday, and the S&P/Case-Shiller June home price index on Tuesday -- to see if the beleaguered sector has finally reached bottom. Markets will also watch the Wednesday's durable goods data for July, to look for improvements in manufacturing.
On Friday, Bernanke signaled that he has no intention of raising interest rates although the inflation outlook remains uncertain.
In a speech at a Jackson Hole, Wyo. Fed conference, Ben Bernanke said the inflation outlook remains uncertain, U.S. economic growth is likely to be slow for while, and that the effects of the credit crunch are now becoming apparent. According to press reports, Fed officials are also discussing the fate of government-sponsored housing agencies Fannie Mae (FNM) and Freddie Mac (FRE).
In his speech Friday, Bernanke reiterated the Fed will act as necessary for "medium term" price stability. He noted the "financial storm" has yet to subside, and that the crisis is softening growth and raising the unemployment rate. He continues to expect moderation in inflation, and has been encouraged by the recent drop in commodity prices and the firmer dollar. But he also cautioned that the inflation outlook remains "highly uncertain."
The central bank chief noted the various liquidity measures the Fed has introduced and added they are to remain under review, but said the Treasury remains the best entity to deal with nonbank failures. His comments are consistent with an expectation for steady rates over the medium term, and the FOMC's rate decisions later this year and in early 2009 will be contingent on the growth and inflation data, as well as the status of the financial markets.
John Ryding, an economist for RDQ Economics in New York, said in a note Friday that "[o]ur reading of this speech is that Bernanke is dovish and has no intention of raising rates in the near term."
Most of the Nobel Prize-winning economists attending the annual economic symposium in Jackson Hole, Wyo., agree that the global financial system may not begin to recover for at least a year, with much deleveraging still necessary in the United States and Europe and many financial institutions needing to add capital or sell assets, but finding it more difficult, the Wall Street Journal reported.
Billionaire investor Warren Buffet said on a CNBC program that Freddie and Fannie "would have been gone long ago as private companies. But they are too big to fail with government backing. Something will happen soon. But they can't be bailed out by the private sector." Buffett blasted OFHEO's oversight of the two companies.
Posts
No comments:
Post a Comment