Stocks rebound as Bernanke sees rates staying low
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Stocks rebound from slide as Bernanke tells Congress interest rates are likely to remain low

Stocks rebounded from a two-day slide Wednesday as Federal Reserve Chairman Ben Bernanke told Congress that low interest rates are still needed to support the economy.

Bernanke sounded an upbeat note about a recovery as part of his regular semi-annual report to Congress on the economy. He told the House Financial Services Committee he still expects interest rates will remain low for an extended period. Investors want to see low-cost borrowing continue to help revive the economy.

Financial stocks helped pull the Dow Jones industrial average up 95 points after the index slid 101 on Tuesday. Meanwhile, the technology-heavy Nasdaq composite index rose after software company Autodesk Inc. reported stronger earnings and revenue than expected.

At the same time, a disappointing report on new home sales brought the latest reminder that a recovery in the economy will be difficult even with government aid.

The Commerce Department said sales of new homes fell to a record low in January. Economists expected an increase. The government said that new home sales fell 11.2 percent last month to a seasonally adjusted annual sales rate of 309,000 units. That's the lowest level on a record that goes back nearly 50 years. It was the third straight monthly drop.

Housing has been a big concern for investors who this week have been worrying about consumer spending. A surprising drop in consumer confidence reminded investors of the fragility of the economic recovery and sent stocks sliding on Tuesday. The market also posted modest losses on Monday.

For more than a year, investors have been looking to answer the question of how soon the economy will be in a sustained recovery. Bernanke's testimony brought calm to the market but another batch of worrisome economic numbers would likely send investors running again. That has been their pattern for months.

John Merrill, chief investment officer at Tanglewood Wealth Management in Houston, said Bernanke's remarks didn't offer anything new for investors but that even another reassurance that rates will remain low for now helped boost traders' spirits.

"The market has these mood swings," he said, noting that only weeks ago investors sold stocks on what appeared to be good news. "Sometimes the market is in the mood to take everything positively."

In midafternoon trading, the Dow rose 95.76, or 0.9 percent, to 10,378.17. The broader Standard & Poor's 500 index rose 10.55, or 1 percent, to 1,105.15, and the Nasdaq composite index rose 25.84, or 1.2 percent, to 2,239.28.

Bond prices mostly fell, pushing yields higher. The yield on the benchmark 10-year Treasury note was unchanged at 3.69 percent from late Tuesday.

The dollar fell against other major currencies following Bernanke's remarks because low interest rates make the currency a less attractive investment. The drop in the dollar lifted prices of commodities, which become cheaper for foreign buyers when the dollar falls. The gain in commodity prices, in turn, lifted energy stocks.

Crude oil rose 73 cents to $79.59 per barrel on the New York Mercantile Exchange. Gold prices fell.

Investors keep watch over interest rates because low-cost cash has been one of the biggest drivers of the stock market's rebound since March 2009. By keeping rates low, the Fed makes it cheaper for businesses and consumers to borrow and help stimulate the economy. If it holds rates too low for too long, however, the Fed risks sparking inflation.

Bernanke's testimony follows the central bank's move last week to boost the rate it charges banks for short-term loans. The increase had been expected, though investors were initially concerned that it signaled that the Fed would soon start raising other rates.

Financial stocks rose after Bernanke signaled that interest rates would remain low. JPMorgan Chase & Co. rose 97 cents, or 2.4 percent, to $40.85, while Bank of America Corp. advanced 35 cents, or 2.2 percent, to $16.29. The stocks were the biggest advancers among the 30 that make up the Dow industrials.

Tech stocks rose after Autodesk's results. The stock rose $2.64, or 10.3 percent, to $28.30.
Among energy stocks, Exxon Mobil Corp. rose 73 cents, or 1.1 percent, to $65.67.

More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 491.5 million shares, compared with 524.9 million shares traded at the same point Tuesday.

The Russell 2000 index of smaller companies rose 6.20, or 1 percent, to 631.27.

Britain's FTSE 100 rose 0.5 percent, Germany's DAX index and France's CAC-40 each rose 0.2 percent. Japan's Nikkei stock average fell 1.5 percent.