GLOBAL MARKETS-Stocks, oil gain as Bernanke pledges low rates
2010-02-24 21:40:59 GMT (Reuters)
NEW YORK, Feb 24 (Reuters) - Global stocks rose and the U.S. dollar fell on Wednesday after Federal Reserve Chairman Ben Bernanke reaffirmed his commitment to keep U.S. interest rates at exceptionally low levels for an extended period.
Oil rose to $80 a barrel as Bernanke's congressional testimony buoyed hopes that low rates, which have made stocks and commodities more attractive, will spur economic growth despite bearish U.S. crude oil inventory figures. For details see: [ID:nSGE61N078]
U.S. Treasuries prices were little changed after some disappointment in the results of a five-year note auction offset the bond-positive comments from Bernanke, who calmed investors after last week's unexpected discount rate hike. [ID:nN24572751]
The surprise move raised fears that an increase in the key fed funds rate would happen sooner than had been previously thought.
But Bernanke said that a weak job market and low inflation would likely let the U.S. central bank keep interest rates low for a long time.
The dollar cut losses against the euro after an unexpected plunge in new U.S. home sales in January further dampened investor sentiment and reinforced the low rates outlook.
The euro rose to a session high of $1.3626 before paring gains to trade at $1.3533, up about 0.2 percent.
U.S. stocks rose on the promise of more cheap money as investors shrugged off a 47-year-low in the pace of new home sales and Bernanke's generally somber tone on the economy. [ID:nN23153536]
"Although we're not going to have robust growth, it is going to generate low interest rates for a long time and a lot of liquidity," said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.
Sectors that were worst hit by Tuesday's sell-off rebounded to lead the way up, including financials and technology.
The Dow Jones industrial average <.DJI> closed up 91.75 points, or 0.89 percent, at 10,374.16. The Standard & Poor's 500 Index <.SPX> rose 10.64 points, or 0.97 percent, at 1,105.24. The Nasdaq Composite Index <.IXIC> added 22.46 points, or 1.01 percent, at 2,235.90.
MSCI's index of world stocks <.MIWD00000PUS> gained about 0.2 percent.
Bernanke told lawmakers that he stood prepared to continue supporting the economy with extraordinary stimulus for some time, but also said the Fed possesses a broad array of tools to remove such accommodation when the time is right.
"The Fed is trying to back away from its liquidity measures and to reduce its balance sheet somewhat, but the Fed is going keep rates low for an extended period," said John Canally, investment strategist at LPL Financial in Boston. "By keeping that language, that's what helping the markets from the new home sales number."
In the oil market, Bernanke's comments outweighed weekly U.S. inventory data from the Energy Information Administration, which showed a larger-than-expected build in crude oil inventories last week on higher imports.
"These were bearish inventory numbers. But it looks like the more Bernanke talks the lower the dollar goes and the higher equities go and that is what crude is reacting too," said Addison Armstrong of Tradition Energy.
U.S. crude for April traded up $1.14 to settle at $80 a barrel. London ICE Brent gained 84 cents to settle at $78.09 a barrel.
Gold dropped for a second straight day as uncertainties about the currency markets and the disappointing U.S. housing data took a toll on sentiment among bullion investors. [ID:nLDE61N0Y5]
Spot gold prices fell $5.50 to $1,096.10. (Reporting by Luciana Lopez, Ellen Freilich in New York; George Matlock, Jo Winterbottom, Ian Chua and Harpreet Bhal in London; writing by Herbert Lash; Editing by Leslie Adler)