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Stocks rebound on Bernanke assurance
February 28, 2007 / 12:16 AM / in 11 years

Stocks rebound on Bernanke assurance

NEW YORK (Reuters) - U.S. stocks rebounded on Wednesday after Federal Reserve Chairman Ben Bernanke said the economy was set to grow moderately, calming investors’ anxiety a day after the Dow industrials had its worst slide since the September 11, 2001, attacks.

<p>The Wall Street street sign is seen outside the New York Stock Exchange in New York February 28, 2007. REUTERS/Shannon Stapleton</p>

But even with the bounce, the Dow recovered with a 52-point gain -- or only about one-eighth of Tuesday’s 416-point loss -- as weak U.S. economic data kept some investors on edge.

Investors snapped up defensive stocks seen better positioned to withstand moderating economic growth.

Shares of consumer products maker Procter & Gamble Co. and those of Altria Inc., the parent of cigarette maker Philip Morris, were among the session’s biggest advancers.

Health-care stocks also rose, with shares of Merck & Co. ending up 2.3 percent, after the drug maker increased its 2007 earnings outlook. The stock was the Dow’s fifth-biggest gainer.

“Bernanke did a good job of not being panicked,” said Christopher Zook, chairman and chief investment officer at CAZ Investments in Houston, Texas.

But he added that investors may again have turned complacent as market corrections were never a one-day event.

“The psychology has been damaged enough and people could continue to take money off the table. To me, the market still probably has room for another 4 to 6 percent on the downside before I would consider it to be pretty attractive.”

The Dow Jones industrial average gained 52.39 points, or 0.43 percent, to end at 12,268.63. The Standard & Poor’s 500 Index rose 7.78 points, or 0.56 percent, to close at 1,406.82. The Nasdaq Composite Index added 8.29 points, or 0.34 percent, to finish at 2,416.15.

STOCKS SLIDE FOR THE MONTH

For the month of February, the blue-chip Dow average lost 2.8 percent, while the broad S&P 500 declined 2.2 percent and the Nasdaq dropped 1.9 percent.

Based on Wednesday’s close, the S&P 500 broke an 8-month winning streak, while the Dow snapped a 7-month-long string of gains. February also marked the S&P 500’s worst monthly decline in nine months.

Testifying before the House Budget Committee, Bernanke said Tuesday’s sharp stock market drop had not changed the Fed’s view that the U.S. economy was sound. In addition, he said there did not seem to be any single trigger for the drop.

Stocks’ steep slide on Tuesday wiped out the market’s gains for 2007. But with Wednesday’s rebound, the Nasdaq recovered to just above break-even for the year, while both the S&P 500 and the Dow Jones industrial average remained in the red.

BETTING ON P&G AND MICROSOFT

Procter & Gamble’s stock climbed 3.7 percent, or $2.24, to close at $63.49 on the New York Stock Exchange. The company, whose brands include Tide detergent and Crest toothpaste, said it withdrew a euro bond issue. The stock was the biggest advancer in both the Dow and the S&P 500.

Altria shares gained nearly 2 percent, or $1.61, to $84.28, also on the NYSE.

Merck’s stock jumped 2.3 percent, or 98 cents, to finish at

$44.16.

On the Nasdaq, shares of software maker Microsoft Corp. rose 1.1 percent, or 30 cents, to $28.17 as investors snapped up some of the tech sector’s worst performers in Tuesday’s rout. Microsoft ranked No. 1 among the gainers in the Nasdaq 100 on Wednesday.

Shares of telecom companies also rose after Sprint Nextel Corp.’s stock shot up 4.5 percent, or 83 cents, to $19.28 on the NYSE. Sprint’s stock advanced after the No. 3 U.S. wireless service provider reported a higher quarterly profit.

SLOWER GDP GROWTH AND HOME SALES

Besides Bernanke, investors also drew support from an overnight recovery in China’s stock market. On Tuesday, China’s benchmark stock index fell nearly 9 percent on concerns about a possible government crackdown on speculation leading to overinflated stock valuations and that sell-off triggered a global plunge in equity markets.

However, weak economic data limited Wednesday’s gains in the U.S. stock market.

The U.S. Commerce Department reported sales of new single-family homes dropped to a slower-than-expected pace in January and the National Association of Purchasing Management-Chicago said its index of Midwest manufacturing was at its lowest level since October 2002.

In addition, the government’s revision of data on gross domestic product showed that the U.S. economy grew at a weaker-than-expected rate in the final three months of last year as businesses built fewer inventories and consumers spent less.

Volume was heavy on the NYSE, where about 2.26 billion shares changed hands, above last year’s estimated daily average of 1.84 billion. On the Nasdaq, about 2.73 billion shares traded, above last year’s daily average of 2.02 billion.

Advancers outnumbered decliners by a ratio of about 9 to 5 on the NYSE and on the Nasdaq, by about 8 to 7.

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