NEW YORK — Federal Reserve Chairman Ben Bernanke gave the stock market the tonic it wanted: Interest rates will stay low.
Stocks rallied Wednesday and ended a two-day slide after Bernanke made his forecast during his semiannual report to Congress.
He told the House Financial Services Committee he still expects rates to 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 92 points after the index slid 101 on Tuesday. JPMorgan Chase and Bank of America both rose more than 2 percent.
Meanwhile, the technology-dominated Nasdaq composite rose after software company Autodesk 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 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 records that go 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 Tuesday. The market also posted modest losses 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.
Jim McDonald, chief investment strategist at Northern Trust in Chicago, said Bernanke’s testimony signaled that interest rates will remain low for the next six months. He said that should allow the economy to proceed with a gradual recovery.
“Even though nothing he said was particularly new, it was just enough to calm the ruffled feathers that were out there,” McDonald said.
The Dow rose 91.75, or 0.9 percent, to 10,374.16. The advance pared the Dow’s loss for the week to 28 points.
The broader Standard & Poor’s 500 rose 10.64, or 1 percent, to 1,105.24, and the Nasdaq rose 22.46, or 1 percent, to 2,235.90.
John Merrill, chief investment officer at Tanglewood Wealth Management in Houston, said Bernanke’s remarks were enough to boost traders’ spirits after a rocky few weeks that saw stocks pull back on concern that equities were getting overheated.
“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.”
