New York – U.S. stocks ended higher Friday, buoyed by a proposal by President Bush to help subprime homeowners and a speech by Federal Reserve Chairman Ben Bernanke, who did not dispel beliefs that a rate cut will come in September.
“Bernanke and Bush were the highlights of the day, with the former reminding the markets that the Fed is not out of touch and the latter offering some proposals on how to mitigate some of the problems facing homeowners,” said Drew Matus, U.S. senior economist at Lehman Brothers Inc.
“We continue to expect a 25-basis-point rate cut at the Sept. 18 (Federal Open Market Committee), followed by another at the October meeting,” Matus said.
The Dow Jones industrial average closed 119 points higher, giving it a weekly loss of nearly 0.2 percent and a monthly gain of 1.1 percent. Of the Dow’s 30 components, 27 finished higher, led by Home Depot Inc., which gained 3.4 percent, and Hewlett-Packard Co., up 1.9 percent.
The S&P 500 rose 16.35 points at 1,473.99, giving it a weekly loss of 0.4 percent and a monthly gain of 1.28 percent.
The Nasdaq Composite closed up 31.06 at 2,596.36, a weekly gain of 0.7 percent and a monthly hike of 1.1 percent.
Trading volume on the New York Stock Exchange came to nearly 1.4 billion ahead of the long holiday weekend, with advancing stocks ahead of decliners by a 7-1 ratio. On the Nasdaq, volume topped 1.5 billion shares, with advancing stocks ahead of declining issues by more than a 2-1 ratio.
In a speech at the central bank’s yearly conference in Jackson Hole, Wyo., Bernanke declared the Fed ready to act as needed to prevent harm to the U.S. economy.
Investors scrutinized the Fed chief’s comments in an attempt at measuring whether Fed policymakers are leaning toward a cut in the federal funds rate, which still stands at 5.25 percent. The financial futures markets expect one or possibly two rate cuts by the end of September.
In Washington, Bush unveiled several steps aimed at helping subprime mortgage borrowers keep their homes, including refinancing into government-insured mortgages, while calling the subprime woes “modest” in relation to the overall economy.
Beyond Bush and Bernanke, several economic reports were released, with the Commerce Department reporting milder-than-expected inflation in July along with slightly better- than-anticipated growth in consumer incomes and spending.
In a separate report, the Commerce Department said orders for U.S.-made factory goods climbed 3.7 percent in July, a showing slightly better than anticipated.
A measure of consumer sentiment had the University of Michigan and Reuters reporting a drop in their index to 83.4 from 90.4 in July.
