Do not enter?: Bernanke helps stocks to modest rebound
NEW YORK -- Federal Reserve Chairman Ben Bernanke steadied Wall Street Tuesday by telling Congress the recession could end this year.
Stocks opened higher, then turned south before Bernanke's semi-annual testimony on the economy helped turn stocks higher again.
The modest move higher followed another sharp drop in the market Monday that left the Dow Jones industrial average and the Standard & Poor's 500 index near 12-year lows.
Wall Street is worried about nationalization of banks but is also afraid of the prospects for the banks if they are left to make do on their own.
"Fear is winning. That's what is dominating everybody's perspective," said Rich Hughes, co-president of Portfolio Management Consultants in Los Angeles.
He said any rallies are likely to be based on hope or on rebounds from sell-offs. He contends Wall Street still hasn't seen the wrenching decline that is often needed to scare investors from the market and set the ground for a lasting recovery.
"The underlying fundamentals just aren't there to support anything that's sustainable right now," he said. "We haven't seen the capitulation that you'd want to see before you'd get thoroughly enthused."
On Monday, all the major indexes tumbled more than 3%. The Dow Jones industrial average fell 251 points to its lowest close since May 7, 1997, while the Standard & Poor's 500 index logged its lowest finish since April 11, 1997.
The market's slide has been tough on long-term savers. An investor who in 1997 had $50,000 in a 401(k) plan that tracks the S&P 500 would have lost money. The fund would now be worth $46,256. Still, stocks tend to perform better after steep pullbacks and their long-term returns often outpace other investments.
Bond prices were mixed Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.74% from 2.76% late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.30% from 0.29% Monday.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose 14 cents to $38.30 per barrel on the New York Mercantile Exchange.
Home Depot posted a loss but the nation's largest home improvement retailer's results topped expectations when excluding costs for shutting four home-improvement brands.
Target and Macy's said fiscal fourth-quarter earnings fell sharply as shoppers cut back on purchases. Office Depot Inc. posted a loss for the quarter.
JPMorgan Chase said late Monday it would slash its quarterly dividend to 5 cents from 38 cents in a move to preserve capital to protect itself should the ongoing recession worsen. The decision will save the bank about $5 billion per year.
Stocks fell in afternoon trading in Europe after Monday's drop on Wall Street. Britain's FTSE 100 fell 0.78%, Germany's DAX index fell 0.73%, and France's CAC-40 fell 0.73%. Earlier, Japan's Nikkei stock average fell 1.5%.