A JOLT TO MARKETS

Fed chief says bond stimulus to continue, Wall Street buys

Stock indexes soar to record highs after Federal Reserve chief Ben Bernanke says the central bank will continue its policy of buying bonds.

Associated Press

NEW YORK — Stock markets surged to record highs Thursday after Federal Reserve chairman Ben Bernanke calmed investor fears of a tapering to the central bank’s economic stimulus.

Bernanke in a speech late Wednesday said the economy needs the Fed’s easy-money policy “for the foreseeable future.”

Stocks surged when the market opened Thursday and stayed high for the rest of the day.

The S& P 500 index jumped 22.40 points, or 1.4 percent, to 1,675.02, surpassing its previous record close of 1,669 on May 21. The Dow rose 169.26 points, or 1.1 percent, to 15,460.92, exceeding the record close of 15,409 set May 28. The Nasdaq composite rose 57.55 points, or 1.4 percent, to 3,578.30.

“The Fed has made it unequivocally clear that they are not in any hurry to do anything,” said market analyst Alec Young of S&P Capital IQ. “It’s very bullish for stocks.”

The market pulled back last month after Bernanke laid out a timetable for the Fed to wind down its bond-buying program. He said the central bank would likely ease back on its monthly purchases if the economy strengthens sufficiently.

Those comments jolted stock exchanges around the world. But in the speech delivered on Wednesday in Cambridge, Mass., Bernanke said the U. S. economy still needs help because unemployment remains high.

It was the latest effort by the Federal Reserve, the agency that regulates the money supply, to reassure investors that it won’t end its stimulus before it is sure the economy is strong enough. The Fed is currently buying $85 billion a month in bonds to keep interest rates low and to encourage spending and hiring.

Bernanke “certainly surprised the markets last night,” said JJ Kinahan, chief derivatives strategist for TD Ameritrade.

Gold prices climbed Thursday by $35.30, or 2.83 percent, to $1,283 an ounce.

Gold is rising because the prospect of continued stimulus from the Fed could weaken the dollar and increase the risk of inflation. That, in turn, increases the appeal of gold as an alternative investment.