U.S. stocks moved higher on February 27, as these equities were driven upward by strong housing data and testimony that Federal Reserve Chairman Ben Bernanke delivered before Congress.
The benchmark S&P 500 Index was trading 1 percent higher at 1,511.57 at 1:11 p.m. in New York, according to Bloomberg. Data compiled by the media outlet reveals that at this time in the session, trading activity in the companies contained in the index was 9.6 below the 30-day average for this point in the day.
At the time, the Dow Jones Industrial Average was approximately 1 percent below its all-time high, trading 0.9 percent higher for the day at 14,027.77, the media outlet reports.
The New York Times reports that Bernanke was on guard, defending the efforts of the Federal Reserve to stimulate the economy from many lawmakers. He emphasized the desire of the central bank to reduce unemployment, an objective it cited as being crucial when it announced its plans to purchased $85 billion worth of debt-based securities every month until significant improvement happened in the labor market.
When asked about the potential impact that the prolonged bond-buying could have on the price level of goods and services in the U.S., the central bank chief replied that "my inflation record is the best of any chairman in the postwar period."
Need for stimulus
He emphasized the need for continued stimulus in the existing economic state, saying that "in the current economic environment, the benefits of asset purchases, and of policy accommodation more generally, are clear."
He added that "monetary policy is providing important support to the recovery."
Boon to assets
Reuters reports that the statements made by Bernanke helped to alleviate the concerns of market participants, as stocks registered a weekly loss during the week ending on February 22.
The testimony of the Federal Reserve chairman also allowed the S&P 500 to rise above 1,500, which is viewed by many as being a crucial level of resistance, according to the news source. The group of stocks has surged 6 percent so far in 2013, but suffered a sharp drop on Monday, February 25.
"The Fed continues to encourage risk-taking in markets, which is a powerful tool that makes the danger not being long stocks, not in being too long," Tom Mangan, a money manager at Xenia, Ohio-based James Investment Research, told the media outlet. "While the rally remains intact and there are reasons to be long-term bullish here, there are also reasons to not be surprised if we get a correction."
Market sentiment was bolstered as it was announced that contracts for pre-owned homes surged by more than predicted in January, according to Bloomberg. Market experts interpreted this data as meaning that the housing industry is on the upswing.
"The housing market is proving a positive delta to the economy for this quarter and year," David Katz, who manages around $825 million as chief investment officer at Matrix Asset Advisors Inc. in New York, told the news source in a telephone interview. "The rally is driven by improvement in sentiment from Europe coupled with positive data."
S&P 500 strength
Data compiled by the media outlet indicates that of the S&P 500-listed companies that have reported their quarterly figures, 75 percent have released figures that surpassed the predictions of analysts. The group of stocks is now less than 4 percent from its all-time high. Even with this high value, the S&P 500 is trading at a price-to-earnings ratio of 14.9, compared to the 16.4 averaged since 1954.
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