Stocks rise as Bernanke emphasises stimulus flexibility

In his testimony in front of Congress todayFederal Reserve Chairman Ben Bernanke insisted the future for the Fed’s asset purchases is in no way pre-determined.

Although Mr Bernanke re-iterated his comments from the last FOMC press conference that stimulus would likely be tapered later this year should the economy continue to meet Fed forecasts, he was at pains to highlight the decision’s dependence on the outcome of economic data, saying the monthly asset purchases ‘are by no means on a preset course’ and that the purchases could even be increased should weakness in the economy warrant it.

‘If the outlook for employment were to become relatively less favorable, if inflation did not appear to be moving back toward 2%, or if financial conditions, which have tightened recently, were judged to be insufficiently accommodative to allow us to attain our mandated objectives, the current pace of purchases could be maintained for longer,’ he said.

This emphasis on the Fed’s flexibility in its monetary policy has re-assured the market, helping shares to rise modestly on Wall Street today. By early afternoon in New York, the Dow had risen 0.0.4% to 15,458 and the S&P 500 climbed 0.3% to 1681.6.

Amongst the Dow components, Bank of America gained 3.3% after reporting a 70% increase in earnings, while Caterpillar acted as a drag after fund manager Jim Chanos said he has shorted the stock.

The NASDAQ 100 rose 0.25%, helped by Yahoo’s 8% rise after the company reported better-than-expected earnings last night.

American Express, Ebay, Intel and IBM all report after the close tonight.

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