Stocks higher after Bernanke testimony

NEW YORK – Wall Street turned higher Thursday as investors looked past reports showing a flagging economy and focused on the possibility that the worst of the financial crisis has passed. ADVERTISEMENT

Federal Reserve Chairman Ben Bernanke said Thursday in testimony to Congress the Fed expects to recover most, if not all, the $29 billion worth of loans it made to keep the struggling Bear Stearns Cos. from collapse. The Fed chief’s remarks, in which he defended the central bank’s decision to aid JPMorgan Chase & Co.’s buy of Bear Stearns, were calming to investors hoping that demand is returning to the tight credit markets.

Even in the face of poor economic data, the stock market has been performing well. Early in the day, stocks dipped after the Labor Department reported a spike in jobless claims to a level not seen since September 2005. But the initial losses were very mild — particularly given the huge advance Wall Street logged Tuesday and has mostly maintained, and the fact that economists expect the government on Friday to report jobs losses for March.

“I think that the desire to sell is coming off,” said Thomas J. Lee, equities analyst at JPMorgan. The fact that the market has not been shaken by recent disappointing economic data “tells me that the recession is largely discounted.”

In addition to Bernanke’s testimony, investors got a bit of relief from the Institute for Supply Management. The ISM said Thursday the services sector contracted only slightly in March — a stronger performance than in February, and a better reading than many economists predicted.

By mid-afternoon, the Dow Jones industrial average rose 26.14, or 0.21 percent, at 12,631.97.

Broader stock indicators also recovered from earlier dips. The Standard & Poor’s 500 index rose 2.43, or 0.18 percent, to 1,369.96, and the Nasdaq composite index rose 1.08, or 0.05 percent, to 2,362.48.

The tech-heavy Nasdaq was weaker than the other indexes, as shares of Cisco Systems Inc. declined on an analyst downgrade. The analyst cited softening demand, and said the networking equipment maker will have to buy other companies to reach its growth target. Cisco fell 68 cents, or 2.7 percent, to $24.28.

The Dow, which shot up nearly 400 points on Tuesday and is up more than 7 percent since March 10, when it hit its lowest point since October 2006.

“I think we’re going to have a big test coming up,” Lee said. “Are U.S. stocks poised for another downturn, or are U.S. stocks telling us the worst is behind us?”

With a broad swath of corporate earnings reports set to arrive in the coming weeks, investors appear optimistic. In recent weeks, the market has been largely willing to overlook weak economic data — as long as they are not wildly worse than expectations — and assuaged by signs that the credit markets are improving.

“You’re going to continue to see weak economic data. That doesn’t mean stocks are going to come down,” said Bill Stone, chief investment strategist for PNC Wealth Management. “We definitely suffered ahead.”

Government bonds were slightly higher. The yield on the 10-year Treasury note, which moves opposite its price, was at 3.58 percent, down from 3.60 percent late Wednesday.

Crude oil fell $1.02 to $103.81 a barrel on the New York Mercantile Exchange, after a surge a day earlier on the prospect of climbing demand for gasoline.

The dollar was mixed against other major currencies, while gold rebounded back above $900 an ounce.

The Russell 2000 index of smaller companies rose 1.36, or 0.19 percent, to 713.63.

Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where volume came to 811.9 million shares.

In corporate news, Schering-Plough Corp. announced late Wednesday it plans to cut jobs to offset continued sales declines of its cholesterol drug Vytorin. Schering-Plough shares soared $1.39, or 10 percent, to $15.25; they had fallen sharply earlier in the week after news that medical researchers were recommending against use of the drug.

In overseas trading, Tokyo’s Nikkei index closed 1.52 percent higher, while London’s FTSE fell 0.42 percent, Frankfurt’s DAX lost 0.53 percent and Paris’ CAC 40 slid 0.49 percent.

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