Closing Market Report
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Stocks move higher on Fed comments
By Adam Geller
Associated Press
NEW YORK » Stocks closed mostly higher yesterday as Wall Street brushed aside concerns about a Chinese interest rate hike to focus on comments by Federal Reserve Chairman Ben Bernanke that a pause in U.S. rate increases may be ahead.
In trading pushed and pulled by the cross currents of earnings reports, fluctuating energy prices and international events, Bernanke's comments overrode all other distractions, analysts said.
"What he's coming through very clearly and saying is we will probably pause soon but don't assume we're done because we pause. ... But I think the market is just reacting to 'Hey, hey, Ben said we might be done soon,'" said Jeff Kleintop, chief investment strategist for PNC Wealth Management. "Whenever you take a little uncertainty out of the picture, well, the market is going to like that."
The Dow Jones industrial average gained 28.02, or 0.3 percent, to close at 11,382.51.
Broader stock indicators also moved higher. The Standard & Poor's 500 index rose 4.31, or 0.3 percent, to 1,309.72, and the Nasdaq composite index rose 11.32, or 0.5 percent, to 2,344.95.
The price of oil fell 96 cents to settle at $70.97 a barrel on the New York Mercantile Exchange. That came after the Energy Department said demand for gasoline rose just 0.3 percent over the past four weeks compared with the same period in 2005. At this time last year, demand had risen 1.5 percent.
But momentum was reversed in U.S. equity markets after the start of congressional testimony by Bernanke.
While the Fed chairman told Congress that rising energy prices could jeopardize a strong economy and lead to further rate hikes, the market chose to focus on comments suggesting a temporary pause may be coming.
Bernanke's comments also boosted bond prices, pushing yields lower. The price of the 10-year Treasury note rose932 point, or $2.813 per $1,000 in face value, while its yield fell to 5.07 percent from 5.11 percent late Wednesday. The 2-year note, which is most responsive to Fed policy changes, gained even more ground.
The markets' rise yesterday reflects continued optimism among investors that the economy will remain strong, gradually slowing, while inflation stays in check. In the near term, investors will be keeping an eye on energy prices and on data including first-quarter economic growth figures to be released today, and reports next week on personal spending and income, and employment for signs that things remain on track, analysts said.