Stocks boosted by Bernanke's take on the economy, banks

NEW YORK -- Major stock indexes jumped Tuesday after Federal Reserve Chairman Ben Bernanke gave Wall Street a double does of reassurance by telling Congress the recession could end this year and regulators aren't planning to nationalize banks.

The news alleviated some of investors' worries about the economy and the banking system, and the Dow Jones industrial average, coming off its lowest levels since 1997, finished up 236.08 points, or 3.32%, at 7350.86, according to preliminary figures. The S&P 500 stock index ended up 29.75 points or 4% at 773.08; the Nasdaq composite index finished up 54.11 points or 3.9% at 1441.83.

In his semiannual report to the Senate Banking Committee, Bernanke predicted the economy is likely to keep contracting in the first six months of 2009. But he also said "there is a reasonable prospect" the recession will end this year. He warned that a recovery will require getting credit and financial markets to operate normally.

While Bernanke's assessment of the economy helped ease some pressure on the market, it also came after days of heavy selling that left the Dow Jones industrial average and the Standard & Poor's 500 index near 12-year lows, so a bounce in stocks wasn't a surprise. Stocks made cheaper by the sell-off attracted bargain-hunting traders. Also, some, better-than-expected quarterly numbers from Home Depot helped cool some anxiety about the economy.

And investors are hopeful that Tuesday night, Obama will provide specifics about his plans to stabilize the financial system and further stimulate the economy. Anticipation of his remarks helped drive beaten-down financial shares up sharply.

"There's growing optimism that Obama can deliver the details that the market is so desperately looking for in his speech," said Ryan Larson, senior equity trader at Voyageur Asset Management. If it gets those details, Larson added, the market's upward momentum could continue.

Stocks remain on shaky ground, however. Bernanke may have helped stem the market's slide Tuesday, but the market also found stability from temporary technical factors: bargain-hunting, the unwinding of short bets, and selling exhaustion after six straight down days for the S&P 500.