Did Bernanke Soothe Market Nerves?

Stocks rebounded on Wednesday as Ben Bernanke reminded Congress that the dreaded “taper” would be triggered by data rather than a date.

Wednesday’s big event was Federal Reserve Chairman Ben Bernanke’s testimony before the House Financial Services Committee. Nobody seemed to care about the release of the Fed’s Beige Book on a day when Dr. Bernanke was making a live appearance. The Chairman’s testimony helped stocks ease out of Tuesday’s slump, after he repeated that the dreaded taper of the quantitative easing program would be triggered by stronger economic data than what we are currently seeing. Most of the questions from Committee members were focused on concerns of their preferred lobbyists, rather than the issue of cutbacks to the Fed’s bond-buying program.

The Dow Jones Industrial Average (NYSEARCA:DIA) picked up 18 points to finish Wednesday’s trading session at 15,470 for a 0.18 percent advance. The S&P 500 (NYSEARCA:SPY) rose 0.28 percent to close at 1,680. The Nasdaq 100 (NASDAQ:QQQ) advanced 0.25 percent to finish at 3,085. The Russell 2000 (NYSEARCA:IWM) climbed 0.36 percent to end the day at 1,042.

In other major markets, oil (NYSEARCA:USO) surged 0.85 percent to close at $37.80. On London’s ICE Futures Europe Exchange, September futures for Brent crude oil advanced by 52 cents (0.48 percent) to $108.66/bbl. (NYSEARCA:BNO). August Gold Futures declined by $16.20 (1.26 percent) to $1,274.20 per ounce (NYSEARCA:GLD). Transports fired-up their Sabre engines on Wednesday, with the Dow Jones Transportation Average (NYSEARCA:IYT) accelerating 0.90 percent.

In Japan, stocks advanced as the yen weakened to 99.51 per dollar during Wednesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (NYSEARCA:FXY).. The Nikkei 225 Stock Average advanced 0.11 percent to 14,615 (NYSEARCA:EWJ).

In China, bartenders and bankers brought bad news to the stock market as reduced demand for alcoholic beverages and a 3-percent nosedive by China’s largest brokerage, Citic Securities, took their toll on the Shanghai Index. The Shanghai Composite Index sank 1.01 percent to close at 2,044 (NYSEARCA:FXI). Hong Kong’s Hang Seng Index advanced 0.28 percent to finish the session at 21,371 (NYSEARCA:EWH).

European stocks made solid gains on Wednesday, as mining companies helped the commodities sector lead the advance (NYSEARCA:VGK). Companies such as BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RIO), and Glencore Xstrata made big gains after Tuesday’s downbeat trading session.

The Euro STOXX 50 Index finished Wednesday’s session with a 0.61 percent advance to 2,681 – struggling back toward its 50-day moving average of 2,701. Its Relative Strength Index is 53.57 (NYSEARCA:FEZ).

Technical indicators reveal that the S&P 500 remained above its 50-day moving average of 1,637 after finishing Wednesday’s session with a 0.28 percent advance to 1,680. At this point, bears are anticipating the formation of a double-top. Its Relative Strength Index rose from 64.23 to 65.43. Both the MACD and the signal line continue to rise above the zero line, suggesting an advance.

For Wednesday, all sectors were in positive territory, except for the utilities sector, which took a 0.04 percent dip. The materials sector led the group, with a gain of 0.93 percent.

Consumer Discretionary (NYSEARCA:XLY): +0.05 percent
Technology (NYSEARCA:XLK): +0.08 percent
Industrials (NYSEARCA:XLI): +0.29 percent
Materials (NYSEARCA:XLB): +0.93 percent
Energy (NYSEARCA:XLE): +0.44 percent
Financials (NYSEARCA:XLF): +0.42 percent
Utilities (NYSEARCA:XLU): -0.04 percent
Health Care (NYSEARCA:XLV): +0.26 percent
Consumer Staples (NYSEARCA:XLP): +0.19 percent

Bottom line: Despite widespread anxiety concerning what Ben Bernanke would say about the dreaded tapering of quantitative easing during his testimony before Congress on Wednesday, stocks made a modest advance after he reminded us that the taper would be triggered by data rather than a date.

John Nyaradi is the author of The ETF Investing Premium Newsletter.

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