From The Associated Press
NEW YORK —
Some soothing words from Federal Reserve Chairman Ben Bernanke pushed the stock market to slender gains on Wednesday. Higher earnings for several major companies also helped.
Bernanke said that the U.S. central bank had no firm timetable for cutting back on its bond purchases. The Fed would consider reducing its stimulus program if the economy improves, but Bernanke emphasized in his testimony to Congress that the reductions were “by no means on a preset course.”
The central bank is currently buying $85 billion of bonds a month to keep interest rates low and encourage borrowing. Concerns that the Fed was poised to start easing back on that stimulus before the economy had recovered sufficiently caused the stock market to pull back in June.
“The market is responding well,” to Bernanke’s comments, said Phil Orlando, chief market strategist at Federated Investors. The concern has been that “the Fed was going to dial the (stimulus) down to zero regardless how the economy was doing.”
The Standard & Poor’s 500 index climbed three points, or 0.2 percent, to 1,680 as of 3:25 p.m. Eastern Daylight Time. The Nasdaq composite rose seven points, or 0.2 percent, to 3,606.
The Dow Jones industrial average was little changed at 15,460. The index was held back by American Express and Caterpillar. The credit card company’s stock slumped $1.88, or 2.4 percent, to $76.40 after European regulators proposed to cap the lucrative processing fees the card company imposes.
Caterpillar fell $1.68, or 1.7 percent, to $86.44 after prominent short-seller Jim Chanos said he was shorting the stock because it was exposed to a slump in the mining industry. In a presentation at the ‘Delivering Alpha’ conference, broadcast by CNBC, Chanos said Caterpillar was “tied to the wrong products, at the wrong time.”
Bernanke’s comments had a bigger impact on the Treasury market than on the stock market.
The yield on the 10-year Treasury note fell to 2.48 percent from 2.53 percent on Tuesday as investors bought U.S. government bonds after Bernanke’s comments. The yield, which moves opposite to the bonds prices, has been gradually declining since July 5, when it surged to 2.74 percent after the government reported that hiring was strong in June.
If Treasury yields climb too fast, it worries stock investors because of the impact that rising interest rates have on the wider economy. Higher mortgage rates, which are linked to Treasury yields, would slow demand for homes.
Homebuilder stocks rose Wednesday as the Treasury yield came down. The group had started the day lower after a government report showed that U.S. builders started work on fewer homes in June. Construction fell 10 percent to an annual rate of 836,000 homes from 928,000 in May, the Commerce Department said.
PulteGroup rose 14 cents, or 0.7 percent, to $19.42. D.R. Horton gained 30 cents, or 1.4 percent, to $22.
The stock market has climbed back to record levels in July following its brief slump in June, when the S&P 500 logged its first monthly decline since October on concern that the Federal Reserve would ease back on its economic stimulus too quickly. The S&P 500 has gained 4.7 percent in July after falling 1.5 percent in June.
The index is up 17.9 percent this year, and could head higher still as the economy improves in the second half of the year, says Rob Lutts, chief investment officer at Cabot Money Management.
“Expect better things,” said Lutts. “The market’s going to churn its way higher from here.”
Investors are also keeping an eye on company earnings during one of the busiest weeks for second-quarter profit reports.
Bank of New York Mellon gained 65 cents, or 2.1 percent, to $31, after the bank posted earnings that beat analysts’ expectations. The bank’s net income surged in the second quarter as market conditions improved and it collected more fees for managing investments. Bank of America rose 44 cents, or 3.2 percent, to $14.37 after it too reported surging earnings for the period, helped by cost-cutting and investment banking gains.
Banks and financial companies are expected to report the strongest earnings growth of all S&P 500 companies, according to data from S&P Capital IQ. The growth for the sector is expected to reach almost 20 percent, according to the data provider. That compares to the average growth of 3.4 percent forecast for all companies.
In commodities trading, the price of crude oil rose 48 cents to $106.48 a barrel. Gold fell $12.90, or 1 percent, to $1,277.50 an ounce.
The dollar rose against the euro and the Japanese yen.
Among other stocks making big moves Wednesday:
— Yahoo rose $2.51, or 9 percent, to $29.38 after the company reassured investors that it would keep buying back its own stock. The internet company had already spent $3.6 billion buying back about 190 million of its shares since last year.
— DuPont rose $3.13, or 5.76 percent, to $57.51, after the investor Nelson Peltz told CNBC that his fund had bought a big stake in the company. Peltz was also speaking at the Delivering Alpha conference.
— Mattel fell $3.16, or 6.8 percent, to $43.17 after its second-quarter net income fell 24 percent, hurt by weak sales in North America and continued softness in Barbie sales, as well as an asset impairment charge.
— St. Jude Medical surged $3.27, or 6.7 percent, to $51.73 after the medical device maker reported better-than-expected second-quarter earnings on higher sales of its heart-shocking implants.