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By Jennifer Yousfi
Comments from U.S. Federal Reserve Chairman Ben S. Bernanke sent the U.S. markets on a bumpy ride in early morning trading, leaving the three major U.S. indices narrowly mixed.
At midday, the blue-chip Dow Jones Industrial Average Index was down just 5.54 points (-0.04%), to trade at 12,648.82. The tech-laden Nasdaq Composite Index increased 9.22 points (0.39%), to reach 2,371.97. And the broader Standard & Poor's 500 Index rose 2.30 points (0.17%), to hit 1,372.48.
The financial sector (up 0.99%) and the energy sector (up 1.00%) posted the biggest gains, while the conglomerates sector (down 0.31%) and the consumer non-cyclical sector (down 0.72%) posted the only sector declines.
Speaking before the Joint Economic Committee, Bernanke acknowledged that U.S. gross domestic product growth for 2008 will likely be flat and a recession is possible.
"The market's hesitations are also a reflection of what's going on with Bernanke's testimony. Those congressmen represent their constituents, people who have had trouble keeping their homes, and they're facing a man that has just rescued Bear Stearns; even if it was to save the financial system, it reeks of a Wall Street bail-out," Art Hogan, chief market strategist at Jefferies & Co., told MarketWatch.
In his first congressional testimony after the Fed-orchestrated bailout of The Bear Stearns Cos. Inc. (BSC), Bernanke said the Fed acted after receiving a warning on March 13 that the investment bank "would have to file for Chapter 11 bankruptcy the next day."
Bernanke said he does not foresee the Fed having to make any similar rescue attempts, signaling to some that the worst of the credit crisis may finally be behind us. Financial shares received a boost with Citigroup Inc. (C) stock up over 3% by noon ET.
"I'm hopeful that Bernanke's correct," Mike Morcos, a vice president at Old Second Wealth Management, which oversees $1.4 billion in Aurora, Illinois, told Bloomberg News. "I certainly suspect there's a lot of opportunities in the financials. The market seems to feel the worst is over" for banks' credit-related losses.
"The rally should be sustained in the medium term because of recent signs that the U.S. markets are stabilizing," Ernie Hon, an analyst at ICEA Securities, told Reuters.
"We are optimistic about mainland banks, and also individual stocks that have been oversold," Hon added.
At midday, the dollar had gained ground against the euro (up 0.890%), the yen (up 3.082%) and the pound sterling (up 0.025%).
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