US stocks surge after Bernanke's inflation comments

Wall Street shot higher today after Federal Reserve Chairman Ben Bernanke said US economic growth seemed to be moderating and inflation remained contained.

The Dow Jones industrial average gained more than 200 points, while Treasury bonds recovered from early losses to close sharply higher.

Investors interpreted Bernanke’s testimony before Congress as a sign the Fed was close to ending its streak of interest rate hikes.

Bernanke told the Senate Banking Committee: ”We think inflation is going to moderate,” and added that the Fed’s previous policy actions, such as rate hikes, could still affect the economy. However, he hedged the inflation outlook by talking about risks that could send prices higher.

Two government reports indicated the US economy was slowing, with core inflation coming in lower than expected and new home construction falling. Strong earnings from IBM, United HealthGroup and two of the US’s largest banks also bolstered stocks, which slumped last week on intensified violence in the Middle East.

“The market has been in selloff mode,” said Jim Herrick, director of equity trading at Baird & Co. “Today, at least, the geopolitical issues are put on the back burner and the focus is on earnings and comments from Bernanke.”

The Dow rose 212.19, or 1.96%, to close at 11,011.42.

Broader stock indicators also gained sharply. The Standard & Poor’s 500 index rose 22.95, up 1.86%, to 1,259.81, and the Nasdaq composite indexrose 37.49, or 1.83%, to end on 2,080.71.