Stocks recover as Bernanke’s prospects improve
Stocks are recovering Monday from last week’s bruising as prospects brightened that Federal Reserve Board Chairman Ben Bernanke would be appointed to another term.
Major stock indexes rose as momentum appeared to shift in favor of Bernanke. Last week several Senators expressed doubt about Bernanke’s reappointment, which had seemed assured. But on Monday Sen. Dianne Feinstein, a influential voice among Senate Democrats, said she’s would back Bernanke.
The Dow Jones industrial average skidded 5.2 percent from Wednesday to Friday of last week as President Barack Obama stepped up his campaign to tighten oversight of banks. Signs last week that Bernanke’s appointment could be in trouble contributed to the big drop.
Bernanke’s term expires on Sunday, and a Senate vote on his reappointment is expected this week.
Bernanke was a key player in guiding the nation through the worst financial crisis since the 1930s, and has pledged to keep interest rates low to stimulate the economy. That has helped boost the stock and bond markets while also providing a steady supply of cheap funding to banks.
The concern isn’t just among those who credit Bernanke with staving off a collapse of the financial markets in the fall of 2008. Many traders don’t want to see a change because that would bring another set of unknowns for a market already burdened by uncertainty about the economy.
Russell Croft, portfolio manager at Croft Leominster Investment Management in Baltimore, said questions about what will happen with Bernanke as well as bank regulation and possible changes to health care have brought concerns that Washington will spoil a recovery.
“Anytime you get the political haranguing going on — worries about the Fed chief or whatever — it’s obviously going to spook the markets,” Croft said.
Stocks continued to slide overseas, with shares falling in Asia on concerns about banks there. The Bank of China said it plans to raise billions of dollars to replenish capital and meet new government requirements.
U.S. stocks wobbled briefly but then steadied themselves Monday after a report that sales of previously occupied homes fell sharply in December. The National Association of Realtors said sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million, raising doubts about the economic recovery. Last month’s drop was the largest in more than 40 years.
In midday trading, the Dow rose 46.56, or 0.5 percent, to 10,219.54. The Standard & Poor’s 500 index rose 6.61, or 0.6 percent, to 1,098.37, while the Nasdaq composite index rose 2.91, or 0.1 percent, to 2,208.20.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.62 percent from 3.61 percent late Friday.
The questions about Bernanke’s reappointment come as Fed policymakers are set to gather for the first meeting of the year on interest-rate policy. The two-day meeting starts Tuesday. The Fed is expected to hold rates at record lows, so investors will be examining the accompanying statement from the Fed for clues about when the central bank might begin to raise rates.
Investors also will receive plenty of economic data and earnings reports throughout the week to help determine how the economy is faring.
Most earnings have topped analysts’ expectations, but unlike in recent quarters, that has not helped send stocks higher. Traders are paying more attention to specifics within earnings reports, such as revenue growth, and forecasts rather than seizing on a better-than-expected profit as a reason to buy shares.
Dozens of companies will report earnings throughout the week, including Apple Inc., Johnson & Johnson, Amazon Inc. and AT&T Inc.
The dollar was mixed against other major currencies, while gold prices rose.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 438.3 million shares, compared with 499.8 million shares traded at the same point Friday.
The Russell 2000 index of smaller companies fell 2.26, or 0.4 percent, to 614.86.
Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index fell 1.1 percent, and France’s CAC-40 lost 1 percent. Earlier, Japan’s Nikkei stock average fell 0.7 percent.