US STOCKS-Wall St lifted by Bernanke pledge of low rates

February 24, 2010

By Leah Schnurr

* Bernanke reaffirms commitment to low rates

* New home sales fall to record low

* Indexes up: Dow 0.8 pct, S&P 0.8 pct, Nasdaq 1 pct

* For up-to-the-minute market news, click [STXNEWS/US] (Updates to midday, changes byline)


NEW YORK - U.S. stocks advanced on Wednesday after Federal Reserve Chairman Ben Bernanke reaffirmed his commitment to keep interest rates low for an extended period to sustain the still fragile recovery.

Bernanke gave a somber view of the economy, which was echoed by a separate report that showed new home sales unexpectedly slumped to a record low in January. But investors were encouraged by the likelihood this will keep rates low. Much of last year's equities rally was driven by ultra-low rates that pushed money into the market.

"Although we're not going to have robust growth, it is going to generate low interest rates for a long time and it's going to generate a lot of liquidity," said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.

"The market loves two things: liquidity and low interest rates."

Sectors that were worst hit by Tuesday's selloff rebounded to lead the way up, including financials and technology. Dow component International Business Machines Corp <IBM.N> gained 0.9 percent to $127.65.The Dow Jones industrial average <.DJI> gained 78.15 points, or 0.76 percent, to 10,360.56. The Standard & Poor's 500 Index <.SPX> rose 8.18 points, or 0.75 percent, to 1,102.78. The Nasdaq Composite Index <.IXIC> climbed 21.09 points, or 0.95 percent, to 2,234.53. On the Nasdaq, Autodesk Inc <ADSK.O> jumped 10.4 percent to $28.31 a day after the architectural software maker posted better-than-expected quarterly profit.

Homebuilder stocks tumbled after government data showed sales of newly built single-family homes fell for a third straight month. D.R. Horton Inc <DHI.N> was off 2.2 percent to $12.30, pushing the Dow Jones Home construction index <.DJUSHB> down 1.2 percent. Bernanke's testimony before the U.S. House of Representatives Financial Services Committee was his first appearance since the central bank raised the discount interest rate last week. While the move was anticipated, the timing was sooner than expected. (Editing by Kenneth Barry)


Keith Springer is President of Capital Financial Advisory Services, a registered investment advisor, providing Wealth Management and Mortgage Consulting Services.  For more information on how to build and maintain a solid retirement plan, please contact Keith Springer at 916-925-8900 or Keith@KeithSpringer.com