- The Washington Times - Monday, March 16, 2009

NEW YORK (AP) - Investors buoyed by comments on the economy from Federal Reserve Chairman Ben Bernanke sent stocks mostly higher Monday. The Dow Jones industrials and Standard & Poor’s index rose for a fifth straight day.

Bernanke said Sunday the recession would probably end this year if the government’s program to boost the banking industry succeeds. But the Fed chairman also cautioned that the task of improving the banking system is a difficult one. During an interview with CBS’ “60 Minutes,” Bernanke said the government needs to get banks to lend more freely and get the financial markets to work more normally.

David Hefty, chief executive of Cornerstone Wealth Management in Auburn, Indiana, said Bernanke’s comments were a lift.

“Absolutely it’s reassuring,” Hefty said. “The American people look to these people for that hope.”

But Hefty said Bernanke’s caveat that the end of the recession is predicated on the success of the government support for struggling banks is still a major question facing the economy and markets.

Analysts said the market’s latest advance supported the theory that stocks had found a bottom earlier this month.

“We’re starting to build a base here,” said Douglas Kreps, a managing director at Fort Pitt Capital Group. “We may not be getting better, but we’re getting worse at a slower rate.”

Kreps added that each day that goes by without disappointing news can help further strengthen that base. “Being able to go a week or more without bad news,” is a good sign, he said.

In late morning trading, the Dow Jones industrial average rose 61.17, or 0.85 percent, to 7,285.15. The Standard & Poor’s 500 index rose 7.09, or 0.94 percent, to 763.64, while the Nasdaq composite index fell 12.49, or 0.87 percent, to 1,419.01.

Investors are building on last week’s gains that saw the Dow rise 9 percent and the S&P; 500 index jump 10.7 percent.

Advancing issues outnumbered decliners by about three to one on the New York Stock Exchange, where volume came to 428 million shares.

Gains on overseas market also fed the advance in the U.S. Japanese financial stocks surged on reports that the government would bolster their capital, while British investors were reassured by the Barclay’s news.

Japan’s Nikkei stock average rose 1.8 percent. In afternoon trading, Britain’s FTSE 100 gained 1.7 percent, Germany’s DAX index rose 1.1 percent, and France’s CAC-40 rose 2.2 percent.

Bernanke’s comments come as some of the hardest hit banks have said in recent days that operations were improving in early 2009. Last week, both Citigroup Inc. and Bank of America Corp., reported improving trends for January and February; Citi’s news ignited the rally that carried over to Monday’s trading.

British bank Barclays PLC said Monday its operations were also improving.

The KBW Bank Index, which tracks 24 of the nation’s largest banks, jumped 4.3 percent to 26.70. Shares of Citigroup rose 38 cents, or 21.4 percent, to $2.16. Bank of America shares gained 57 cents, or 9.9 percent, to $6.33.

Investors were able to shake off more weak economic data. The nation’s industrial output fell for the fourth straight month in February, falling 1.4 percent and hitting the lowest level in more than 50 years of record keeping. Hefty said momentum carrying over from last week is a primary driver of gains early this week, which he sees lasting into at least Tuesday.

“Investors have a stampede mentality,” Hefty said. “They stampede in and they stampede out.” He added that the current rally is probably not sustainable, and mostly just helping bring the market back to a range near the previous lows seen in November.

Meanwhile, bond prices mostly fell Monday as investors gravitated toward stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3 percent from 2.90 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.20 percent.

The dollar mostly fell against other major currencies. Gold prices also fell.

Oil prices fell $1.06 to $45.19 per barrel in on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 1.99, or 0.51 percent, to 395.08.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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