U.S. stocks rose, with the Standard & Poor’s 500 Index (CME:SPH14) rebounding from its biggest drop in three weeks, after Federal Reserve Chairman Ben S. Bernanke said the economy is poised for faster growth even as he cuts stimulus.
FireEye Inc. soared 36% after acquiring Mandiant Corp. in a $1.05 billion deal that consolidates providers of services that protect computer networks against hackers and spies. General Motors Co. fell 3.4% after December sales missed estimates. Sprint Corp. dropped 4.2% as Stifel Nicolaus & Co. downgraded the mobile-phone operator to sell from hold.
The S&P 500 rose 0.2% to 1,836.27 at 3:26 p.m. in New York after falling 0.9% yesterday. The Dow Jones Industrial Average advanced 71.51 points, or 0.4%, to 16,512.86. Trading in S&P 500 stocks was 7.9% below the 30-day average at this time of day.
“What he was trying to do is rationalize the decision, saying we did the right thing with the headwinds disappearing,” Donald Selkin, who helps manage about $4 billion as the New York-based chief market strategist at National Securities Corp, said in a telephone interview. “The key here is the continued monetary policy accommodation, he’ll keep the Fed funds low and that’s what the market wanted to hear.”
The S&P 500 erased an earlier decline of as much as 0.2% after Bernanke said the headwinds that have held back the U.S. economy may be abating, leaving the country poised for faster growth.
“The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters,” Bernanke said today in remarks prepared for a speech in Philadelphia. The chairman, who has led the central bank during its record quantitative-easing program, ends his eight-year tenure on Jan. 31.
Central bank officials said last month they will reduce their monthly purchases of assets to $75 billion from $85 billion starting this month, citing faster-than-estimated economic growth.
Bernanke said the decision to taper bond purchases “did not indicate any diminution of its commitment to maintain a highly accommodative monetary policy for as long as needed.”
Fed policy makers will continue to weigh stimulus reductions because improvements in the job market are meeting the central bank’s objectives, Richmond Fed President Jeffrey Lacker said today at a Maryland Bankers Association forum in Baltimore.