Investors didn't hear anything to get excited about in Ben Bernanke's prepared testimony before the Congressional Joint Economic Committee on Tuesday morning.
Major indexes actually took a turn for the worse, with the S&P 500 down about 1 per cent in late-morning trading, putting it back below the 900-level - a surprising move given that the chairman of the Federal Reserve essentially agreed with many of the market's recent assumptions: The economy is bottoming out and growth is expected to resume later this year.
Mr. Bernanke said that this optimism is supported by "our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters."
He was cautious about the upcoming recovering though, warning that unemployment could remain elevated for some time and economic growth will be below its potential - but these caveats were hardly surprising given the depth of the recession. Gross domestic product fell by more than 6 per cent during each of the previous quarter, the worst setback for the U.S. economy in about 50 years.
Adding to the mystery, Mr. Bernanke's testimony occurred around the same time that investors received another piece of evidence that things are indeed getting better: April's ISM non-manufacturing index rose to 43.7, up from 40.8 in March and above economists' expectations.
"On the whole, this was a very encouraging report and when combined with last week's ISM manufacturing sector report, suggests that the pace of contraction in the U.S. economy may be easing," said Millan Mulraine, economics strategist at TD Securities, in a note.