A10
EZ SU
KLMNO WASHINGTON BUSINESS Bernanke: Fed prepared to take big steps economy from A1
has are hard to predict. “The issue at the stage is not
whether we have the tools to help support economic activity and guard against disinflation,” Ber- nanke said. “We do. . . . The issue is instead whether, at any given juncture, thebenefits of each tool, in terms of additional stimulus, outweigh the associated costs or risks of using the tool.” In the case of bond purchases,
for example, it is not clear that spending even $1 trillion or more would bring down interest rates much for ordinary consumers or businesses, since rates are al- ready very low. But such an ex- pensive bond program could fuel inflation down the road and spark worries that the Fed is “monetizing the debt,” or printing money to fund large budget defi- cits.
Bernanke said that the Fed’s
policy committee has not agreed on “specific criteria or triggers for further action” but stressed that action would be taken if the econ- omy seemed headed into a new recession or deflationary cycle. Meanwhile, Jean Claude
Trichet, the world’s other most powerful central banker, told conference participants that the global economy would have to shed debts incurred during the past three decades.He called this indebtedness an underlying cause of the financial crisis. “The key challenge for stability
and growth over the coming de- cade is to ensure a progressive reduction in the debt overhang and the orderly restructuring and strengthening of the balance sheets of banks, households, firms, governments and central banks,” said Trichet, president of the European Central Bank. In advocating that govern-
ments adopt a cautious approach to fiscal policy and bring budget deficits down, Trichet was again underlining his differences with many American leaders who ar- gue that now is not the time for fiscal restraint. “Fiscal consolida- tion pushes the economy towards a durable recovery,” he said. With Bernanke signaling that
no major Fed actions are immi- nent, the U.S. government is now hard-pressed to offer any imme-
PRICE CHAMBERS/REUTERS
Federal Reserve Chairman Ben Bernanke, right, with Vice Chairman DonaldKohn at the JacksonHole, Wyo., symposium. In his speech, Bernanke sought to clarify the Fed’s stance on the faltering recovery.
“I expect the economy to continue to expand . . . albeit at a relatively modest pace.” —Ben S. Bernanke, Federal Reserve chairman
diate solutions to the nation’s economic weakness. Fiscal policy is largely stale-
mated ahead of midterm Con- gressional elections inNovember, with no newsignificant spending programs or tax cuts under dis- cussion on CapitolHill. With Democrats looking for
any way to pump more money into the economy, some senior members of the party are having second thoughts about raising taxes on the nation’s wealthiest families and are pressing Demo- cratic leaders to consider extend- ing the full array ofBushadminis- tration tax cuts, at least through next year. The White House and Democratic leaders in Congress have been planning to let the Bush-era tax cuts for the wealthi-
est families expire as planned in December. Seeking to capitalize on popu-
lar frustration over the tepid re- covery, House Minority Leader John A. Boehner (R-Ohio) called earlier this week for President Obamato fire his entire economic team. In his speech, Bernanke ac- knowledged that the recovery is “somewhat less vigorous” than he and his Fed colleagues had ex- pected. But he offered some mod- estly reassuring words about the outlook for growth. “I expect the economy to con-
tinue to expand in the second half of this year, albeit at a relatively modest pace,” the Fed chairman said, adding that the conditions needed for an acceleration of
growth in 2011 “appear to remain in place.” Bernanke stressed that the Fed
does not have the power to single- handedly rescue the U.S. econo- my. “A return to strong and stable economic growth will require ap- propriate and effective responses from economic policymakers across a wide spectrum, as well as leaders from the private sector,” Bernanke told the assembled crowd of economists and policy- makers from around the world. “Central bankers alone cannot solve the world’s economic prob- lems.”
irwinn@washpost.com
Stocks rebound on Fed, data reports Bernanke eases
some fears about weak economic recovery
BY SONJA RYST
U.S. stocks jumped Friday, re- covering some of the week’s loss- es, as investors were encouraged by better-than-expected news about economic growth and a renewed commitment from the Federal Reserve to intervene should the economy take a turn for the worse. TheDowJones industrial aver-
age rose 164.84 points, or 1.7 percent, to close at 10,150.65, while the broader Standard & Poor’s 500-stock index climbed 17.37, or 1.7 percent, to 1064.59. Federal Reserve Chairman Ben
S. Bernanke said in a closely watched speech Friday that the central bank would take new ac- tion to boost the economy only if conditions worsened. He also called it “reasonable to expect some pickup in growth in 2011 and in subsequent years,” during an address at the Federal Reserve Bank of Kansas City’s annual eco- nomic symposium. For weeks, investors have been
dour and jittery over an economic recovery that is showing in- creased signs of weakness. Many onWall Street have looked to the Fed for clearer signals about the economy, but been disappointed. After Bernanke signaled two
weeks ago during congressional testimony that the central bank would be open to taking addition- al steps to bolster the economy, the market tumbled for days and investors wondered if Bernanke had lost confidence in the recov- ery.OnFriday, analysts pointed to Bernanke’s speech as a key reason that the markets rose. “The market is relieved that Bernanke is signaling that the economy is going through a soft patch but not a double dip,” said Peter Cardillo, chief economist at Avalon Partners. Stocks were also lifted by
slightly stronger-than-expected data on economic growth during
the second quarter. In a revised estimate issued Friday, the Com- merce Department said gross do- mestic product expanded at a 1.6 percent annual rate in the April- through-June period, which is down from an earlier estimate of 2.4 percent but better than the 1.4 percent forecast by analysts sur- veyed by Bloomberg. That news followed Thursday’s announcement that 473,000 job- less claims were filed in the Unit- ed States during the week ended Aug. 21, while analysts had fore- cast there would be 490,000, ac- cording to Bloomberg. After taking those doses of per-
spective, investors bid shares in Intel up again Friday, even though the Santa Clara, Calif., technology company announced that its third-quarter revenue would be below its previous out- look. Intel’s stock price dipped initially but then recovered to close at $18.37, up 1.1 percent from the previous close. In contrast, when Cisco Sys-
tems had disappointed the mar- ket Aug. 11 with revenue esti- mates below analyst forecasts, stock prices suffered. Investors have sold stocks as
they scrutinized various indica- tors for signs about the economic recovery, and the Dow is down roughly 2.7 percent for the year. Themarket took a hit thisweek
after the National Association of Realtors said Tuesday that sales of previously owned homes were sharply lower in July following the expiration of a lucrative gov- ernment home-buyer tax credit. For the week, the Dow closed
down 0.6 percent, and the S&P 500 finished down 0.7 percent. “I think the market was ready
for good news,” said Fred Dick- son, chief market strategist at D.A. Davidson & Co. in Lake Os- wego, Ore. Traders probably de- cided to buy beaten-down stocks ahead of the weekend, he said. “While the good news [about Ber- nanke and the GDP] wasn’t great, it was better than expected.”
rysts@washpost.com
Staff writer Neil Irwin contributed to this report.
On Mondays, TheWashington Post offers Capital Business, a weekly publication covering the region’s business community. A one-year subscription costs $49 and is available only to Post subscribers.
Visitwashingtonpost.com/capitalbusiness for more details.
This week: A look at office space in the Dulles corridor. Despite construction on a new Metrorail line to Dulles International airport, more than 20 office buildings there now sit vacant or nearly so, one of the major soft spots in the region’s commercial real estate market.
6Monitor your investments
atwashingtonpost.com/markets
U.S. Stock Market Performance Index
Dow Jones Industrial Average
10,325 10,250 10,175 10,100 10,025 9950
Nasdaq Composite Index
2200 2175 2150 2125 2100
S&P 500 Index
1085 1070 1055 1040
Mon. 3M
Close 81.00
AmExp AT&T BoA
Boeing
Caterpillar Chevron
10.32 40.91 26.94 12.64 63.16 65.90 74.93
56.16 41.01
14.71 Tue.
Dow Jones 30 Industrials Company Alcoa
Weekly % Chg
0.4
1 Year % Chg
13.1
–2.4 –16.8 0.4 1.9
20.5 2.0
Cisco Systems 20.81 Coca-Cola DuPont
Exxon Mobil 59.80 GE
Home Depot 28.74 HP
38.00
–1.8 –29.5 –2.2 –4.3 –0.2 –6.4 1.6 1.7
–2.1 2.0
Other Measures Index
21.9 40.0 5.5
–4.9 13.6 26.8
1.5 –15.6 3.7 4.3
–4.6 –15.2 Close
DJ Total Stock Market Index 11,097.61 Russell 2000
616.76
Post-Bloomberg DC Area Index 184.88 CBOE Volatility (VIX)
24.45 Wed.
Company IBM
Intel J&J
JPMorgCh Kraft Foods McDonald's Merck
Microsoft P&G Co Pfizer
Travelers
United Tech Verizon
Wal-Mart Walt Disney Thur.
Close 124.73
18.37 57.60 36.60 30.00 73.99 35.00 23.93 59.80 16.09 49.87 66.57 29.84 51.00 32.78
Fri.
Weekly % Chg
–2.2 –2.9 –1.9
1 Year % Chg
4.4
–5.7 –4.8
–1.5 –15.8 3.1 1.2 1.6
5.6
29.4 6.5
–1.2 –0.3 1.1
–0.4 –2.3 1.6 1.6
–0.8
–3.1 12.7 –4.6 1.4
10.9 2.9
–0.5 21.4
Interest Rates Consumer Rates
Weekly % Chg 1 Year % Chg –0.5 1.0 0.4
4.7 5.7 3.8
–4.1 –0.9
Money market funds 6-Month CDs 1-Year CDs 5-Year CDs New car loan Home-equity loan
0.73 0.77 1.09 2.36 6.08 7.33
0.30% 0.25% 3.25%
Bank Prime Federal Funds LIBOR 3-Month
3.65% 3.93% 4.50%
30-Year fixed mortgage 15-Year fixed mortgage 1-Year ARM
1064.59 –0.7 +3.3 2153.63 –1.2 +6.2
Weekly Close % Chg
1 Year % Chg
10,150.65 –0.6 +5.9 THEMARKETS Industry Group
S&P 500 Industry Group Snapshot –4%
Weekly % Chg
Diversified Consumer Svcs Electric Utilities Multi-Utilities
Power Prodct & Enrgy Trdr Diversified Telecomm Capital Markets
Computers & Peripherals Health Care Eqp & Suppl Communications Equipment Office Electronics
2.9 2.1 2.1 1.6 1.6
–3.3 –3.4 –3.4 –3.5 –3.7
International Stock Markets Americas
Close
Brazil (Bovespa) Canada (S&P/TSX Comp.) Mexico (Bolsa) Europe
Eurozone (DJ Stoxx 600) France (CAC 40) Germany (DAX) U.K. (FTSE 100)
Asia Pacific
Australia (ASX 200) China (CSI 300) Hong Kong (Hang Seng) Japan (Nikkei)
65,585.14 11,879.72 31,755.35
251.24
3507.44 5951.17 5201.56 4370.10
2858.57
20,597.35 8991.06
Cross Currency Rates US $
EU €
US $ per EU € per
Japan ¥ per Britain £ per Brazil R$ per
Canada $ per Mexico $ per
0.7851 85.2600 108.5900
0.6444 0.8206 0.0076 1.7510 1.0518
13.0252 16.5903 0.1530
2.2302 0.0205 1.3398 0.0123
Weekly % Chg
–1.6 1.3
–1.7
–0.4 –0.5 –0.9 0.1
–1.4
–1.4 –1.8 –2.1
Japan ¥
1.2737 0.0117 0.0092
Britain £ 1.5518
Brazil R$ Canada $ Mexico $ 0.5711
0.9507 0.0768
1.2185 0.4484 0.7464 0.0603 132.3100 48.6933 81.0600 6.5460 0.3680 0.6126 0.0495 1.6647 0.1344 0.0808
2.7173 1.6323 0.6007 20.2150 7.4390 12.3830 Treasury Performance Over Past Three Months
10-year note Yield:
5-year note Yield:
2.64 1.49
4:30 p.m. New York time.
2-year note Yield:
6-month bill Yield:
0.56 0.18
Note: Bank prime is from 10 major banks. Federal Funds rate is the market rate, which can vary from the federal target rate. LIBOR is the London Interbank Offered Rate. Consumer rates are from Bankrate. All figures as of
1 Year % Chg –15%
0% +4%
Commodities Futures
Copper Corn
Crude Oil Gold
Natural Gas
Weekly Close % Chg
$3.3640 $4.2100 $75.17
$1236.00
+2.2 –0.1 +2.3 +0.7
$3.65 –11.3
Value of $1000 invested for the past: Exchange-Traded (Ticker)
Weekly % Chg
0% +15%
Coffee (COFF.L) Copper (COPA.L) Corn (CORN.L) Cotton (COTN.L) Crude Oil (CRUD.L) Gasoline (UGAS.L) Gold (BULL.L)
Natural Gas (NGAS.L) Silver (SLVR.L)
–2.3 2.5 2.0 4.1 0.6 1.2 1.1
–7.1 7.4
Local Gainers and Losers Value of $1000 invested for the past: Company
Sourcefire Inc Spherix Inc Argan Inc
Washington Post MICROS Systems Neuralstem Inc Cogent Comm
$26.93 $1.75 $8.44
$384.82 $39.44 $2.02 $9.08
HumanGenomeSciences $29.38 Severn Bancorp Inc Optelecom-NKF Inc Synutra Intl USEC Inc
$4.01 $1.37
$11.25 $4.63
FederalAgricultural Fortress Intl Entremed
Williams Industries week
Weekly Close % Chg
22.0 20.7 12.5 10.7 10.0 9.8 9.4 8.0
–8.2 –8.7 –8.8 –9.6
$9.00 –10.0 $1.29 –11.0 $2.75 –18.2 $1.10 –18.5
$0 $1000 year $2000
Orange Juice Silver
Soybeans Sugar Wheat
$500 Data and graphics by
Weekly Close % Chg
$1.3450 –0.2 $19.04
$10.2200 $0.1996
week
+5.8 +1.3 +0.1
$6.6250 –2.4 year
$1000 $1500
SATURDAY, AUGUST 28, 2010
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