Markets Soar on Bernanke Comments

U.S. stocks rallied Wednesday, sending the Dow Jones industrial average to a record close, as investors drew support from Federal Reserve Chairman Ben Bernanke's comments that inflation is poised to ease while the economy grows moderately.

The Dow Jones industrial average rose 87.01 points, or 0.69 percent, to end at a record 12,741.86. The Standard & Poor's 500 index advanced 11.04 points, or 0.76 percent, to finish at 1,455.30. The Nasdaq Composite Index gained 28.50 points, or 1.16 percent, to 2,488.38.

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It was a broad-based rally, with influential sectors such as technology and financial services leading gains. The market also got alift from stronger-than-expected earnings from companies, including Applied Materials Inc. (AMAT).

The Fed chief's message in testimony to Congress eased worries that the U.S. central bank might raise interest rates control inflation any time soon. Traders said Bernanke's comments also increased hopes that the Fed may cut rates later in the year, which could help enhance corporate profits.

"This was a very sanguine comment on inflation, and that was very encouraging," said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, New York. "It says to me that the Fed is not likely to change interest rates any time soon."

Shares of rate-sensitive stocks, including banks, rose. Citigroup Inc. (C) gained 0.9 percent while Morgan Stanley (MS) rose 1.4 percent.

The Dow rose as high as 12,759.40, an intraday record, while the S&P 500 climbed to 1,457.65 — its highest since September 2000.

It was the second day of strong gains for the market. On Tuesday, the Dow snapped a 3-day streak of losses and had its biggest gain of the year.

Shares of Applied Materials, the top supplier of equipment for making microchips, rose 3.9 percent, or 70 cents, to $18.89 on the Nasdaq. The company posted a profit that topped expectations. It also said revenue could rise as much as 5 percent in its current quarter.

In other earnings news, farm equipment maker Deere & Co. (DE) jumped to an all-time high at $113.72 after it reported stronger-than-expected profit. In New York Stock Exchange trading, Deere's stock ended at $111.91, up 9 percent, or $9.24, for the day.

Bernanke told the Senate Banking Committee the economy seems likely to expand at a moderate pace this year and next, with growth strengthening as the drag from housing ends. He added there were indications that inflation pressures were beginning to diminish. On Thursday, he will give the second part of his semiannual testimony to Congress, by appearing before the House Financial Services Committee.

Financial services stocks were among those giving the biggest lift to both the blue-chip Dow average and the broad S&P 500. Citigroup gained 47 cents to end at $54.18 on the NYSE and was among the top advancers in the Dow and the S&P 500. Morgan Stanley's stock shot up $1.11 to $82.36 and was among several banks and investment banks that helped the S&P.

The Nasdaq also was boosted by navigational device maker Garmin Ltd., which said fourth-quarter earnings more than doubled..

Garmin's stock climbed 8.1 percent, or $4.29, to $57.

Microsoft Corp (MSFT) shares rose 1.3 percent, or 37 cents, to $29.40, after it agreed to settle a class-action lawsuit in Iowa that accused the world's largest software maker of overcharging consumers in the state.

Trading was moderate on the New York Stock Exchange, with about 1.52 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.25 billion shares traded, above last year's daily average of 2.02 billion.

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