Stocks made an impressive rebound from an early dip on Tuesday, after investors took an upbeat view on Federal Reserve chairman Ben Bernanke’s testimony in Washington.
The Dow Jones industrial average closed at 12,805.32, up 78.11 points or 0.6 per cent – marking a 160-point rebound from its low point during the day.
The broader S&P 500 closed at 1,363.67, up 10.03 points or 0.7 per cent.
In Canada, the S&P/TSX composite index closed at 11,571.19, up 50.01 points or 0.4 per cent.
Although there some upbeat economic reports for investors to digest – including a 0.4 per cent gain in U.S. industrial production in June, a rise in homebuilder confidence and tame inflation – the focus was largely on Mr. Bernanke’s testimony before the Senate Banking Committee.
Mr. Bernanke’s remarks weighed on major indexes after he said that reducing unemployment would be “frustratingly slow” but offered no solutions in the form of additional stimulus – dashing some expectations that he would use the opportunity to outline the need for an economic booster.
However, markets rebounded soon after, presumably on the hope that stimulus was still coming.
The Fed did offer a form of stimulus in its last monetary policy report.
However, with economic conditions deteriorating since then – highlighted by a disappointing monthly payrolls report for June – many observers have been counting on the Fed to take a more aggressive stance.
Meanwhile, the Bank of Canada held its key interest rate unchanged at 1 per cent on Tuesday, as expected.
While it trimmed its economic growth outlook to 2.1 per cent this year from 2.4 per cent previously, it maintained its line that interest rates could move higher. Some observers have been expecting the central bank to cut its key rate before increasing it.
Goldman Sachs Group Inc. reported that its second quarter earnings fell 11 per cent from last year, topping expectations for a bigger slide. The shares rose 0.3 per cent.
Johnson & Johnson beat expectations with its quarterly earnings but lowered its full-year guidance. The shares rose 0.8 per cent.
Coca-Cola Co. rose 1.6 per cent after reporting that its net earnings fell 0.4 per cent over last year, due to rising costs. However, revenues beat expectations.
Crude oil continued its steady rebound, rising to $89.22 (U.S.) a barrel, up 79 cents. Among Canadian producers, Suncor Energy Inc. rose 0.9 per cent.