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Stocks Respond to Bernanke’s Words

Stock market responds positive after Fed shows sign to help with addition easing in the economy

On Friday, stocks opened down, but were able to reverse course after The Wall Street Journal obtained a copy of a letter from Ben Bernanke, the Chairman of the Federal Reserve that suggested there was still room for the Fed to help with addition easing in the economy.

The letter was from Bernanke to Rep. Darrell Issa of California, a Republican. In the letter, Bernanke wrote that there was scope of additional action by the Bank to help ease the financial conditions of the economy and strengthen its recovery.

The Dow was down over 30 points but ended the down more than 100 higher, which was its first gain the entire week. For the week, the Dow was still down. The S&P 500 was up just over 9 points, but was down for the week as well, which broke a six-week string of gains. The Nasdaq increased by over 16 points, but ended its consecutive weekly streak of gains at five weeks.

August is typically quiet, with very little to influence the market. The market has been seeking out hints as to what the Central Bank might do. Stocks increased late on Wednesday as well when minutes from a Fed meeting hinted that it was preparing to take additional action to boost the economy.

However, on Thursday stocks slid back when a regional Fed bank president’s comments cast doubt on the Fed helping soon. He said it appeared the economy was beginning to gain some strength.

Then Bernanke’s letter shook the market again on Friday. Bernanke wrote the letter to Issa to respond to certain questions the chairman of the House Oversight Committee asked about whether it was too early to consider more economic easing.

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