Stocks Up as Bernanke, GDP Reassure Investors

(CBS/AP)  Updated at 7:38 p.m. ET

Stocks posted big gains after Federal Reserve Chairman Ben Bernanke said the central bank was ready to step in if the U.S. economy showed further signs of weakening.

Traders were also encouraged by a downward revision in second-quarter economic growth Friday that wasn't as bad as economists had expected. The Dow Jones industrial average and other indexes all gained more than 1 percent.

Bernanke said in a speech at the Fed's annual conference that while the economic recovery remains tentative, the central bank remains ready to take extra steps to stimulate the economy if necessary, such as buying more debt securities in order to keep interest rates low. He said he still expects the economy to grow next year.

"It could have been worse, and because it wasn't, that was good news," said Alan Gayle, senior investment strategist for RidgeWorth Investments, based in Richmond, Va. "Clearly the bar is being lowered for what constitutes good news these days."

The upturn was a respite from a mainly dismal month on the stock market, which has been falling steadily since its recent high reached on Aug. 9 on a series of poor indicators on the economy. A deep slump in home sales last month was the latest sign that the economy was weakening.

Many ordinary investors have already sold their stocks, CBS News Correspondent Anthony Mason reports. Financial adviser Ray Meadows of Berkeley Investment Advisors has been moving his clients into bonds, Mason reports. Already this year, investors have pulled $33.2 billion out of mutual funds that invest in U.S. stocks, according to the Investment Company Institute.

The market stumbled briefly in midmorning after Intel Corp. lowered its revenue estimate. There, too, the news wasn't as bad as it could have been. Intel's shares edged higher after resuming trading since the company's new forecast wasn't as bad as the worst estimates circulating among analysts.

In economic news, the Commerce Department reported that gross domestic product grew at a 1.6 percent rate in the April-to-June period. That's still way down from its earlier estimate of 2.4 percent but not as bad as the 1.4 percent expected by economists.

"These are terrible numbers," Kim Caughey, equity research analyst at Fort Pitt Capital Group in Pittsburgh, said. "But they weren't frighteningly horrible."

Yields on Treasurys, which help set interest rates on loans like mortgages, rose sharply as their prices fell. That could put upward pressure on mortgage rates, which are still at historic lows.

The Dow Jones industrial average rose 164.84, or 1.7 percent, to close at 10,150.65. The Standard & Poor's 500 Index rose 17.37, or 1.7 percent, to 1,064.59 and the Nasdaq composite index rose 34.94, or 1.6 percent, to 2,153.63.

The Dow's gains Friday wiped out much of its losses for the week, but all major indexes still ended the week with losses. The Dow was down 0.6 percent for the week, the S&P 500 was down 0.7 percent, and the Nasdaq lost 1.2 percent.

Rising stocks outnumbered falling ones six to one on the New York Stock Exchange, where consolidated volume came to 4.2 billion shares.

The yield on the 10-year Treasury note rose to 2.65 percent, well above the 2.48 percent it was trading at late Thursday.

A heated-up bidding war between Dell Inc. and Hewlett-Packard Co. also helped to lift shares. The big computer makers are battling to control the data-storage company 3Par Inc. HP fired the latest salvo early Friday, raising its bid for 3Par to $1.88 billion, topping Dell's latest offer by 11 percent.
3Par shares gained $6.43 to $32.46, above HP's latest offer of $30 per share and a sign that investors are hopeful for another counteroffer from Dell. Dell's initial bid for 3Par last week was $18 per share.

Intel was up 19 cents at $18.37.

European shares also moved higher after the better-than-expected figures on U.S. economic growth came out. European shares also got a lift after the Britain raised its estimate of second-quarter economic growth to 1.2 percent from 1.1 percent.

In London, the FTSE-100 index rose 0.9 percent, while the DAX 0.7 percent and the CAC-40 in Paris rose 0.9 percent. In Asia, Japan's Nikkei 225 closed up 1 percent.

[pensacola8-2009]

There is no better way to divide a worker from their passion to work than to perpetuate spreading incendiary and divisive media that spoils motivation. The same goes for dividing an investor's passion to invest.

Negative media chokes our own throats. We have to survive. We have to invest in ourselves. We have to pay taxes. We have to work.

If you enlist or enroll the sensational media to tell you what to think or what you you say or do, you will never work, invest in yourself or others or never survive.

The sensational media flourishes when we, you, or anyone fails. Shun the sensational media and politics and seek the facts without seeing them through the polarized lenses of divisive ideologies.

Get busy living or get busy dying.

[Midwest_Ben]

The idea that the recession is over and we could go back to another one is insulting. Since when have we escaped the other recession??? I dislike the attitude reporters have given this story in todays broadcast...

[sjc_1]

You have to know the economist's definition of recession, two successive quarters of negative GDP growth. Expansion is thus seen as two successive quarters of positive GDP growth. By those definitions we have come out of the recession.

[bajajohn1]

The real problem today is that nobody trusts Wall Street. The manipulators who created artificial wealth sacrificed America on paper and not tangible goods. Supposedly, a service economy was the goal and the achievement was poverty for all those who sweated to make an honest living.

[AnnieDanny]

Seems to me that all the efforts to stimulate the economy are aimed at the wealthy. Trying to stimulate Wall Street investors etc.

I think if they really want to stimulate the economy they should provide relief for people at the bottom or middle of the food chain. Middle class America is disappearing. And it's the middle class that's not getting any help. It's the middle class that makes up the bulk of hard working Americans, not living off welfare or social security, but actively working to pay their own way. Middle class America only dabbles in investments and securities when they're doing well. And they're not doing well. The cost of living is up, the cost of everything is up. The cost of gas is what inflated everything, and prices haven't come back down even though the cost of gas did fall dramatically after Wall Street crashed in 2009.

Find a way to help the Middle Class and I think they'll accomplish a lot more than trying to figure ways to fuel Wall Street.

[mnguyen4]

It is true that most of the stimulus money is going to help the rich or the Wall Street investor class. What the American Middle-class needs is jobs.

The last 2 decades saw the United States losing millions of jobs through illegal workforce, through outsourcing, and through job off shoring. We lost low pay jobs; we lost blue-collar jobs; and we lost white collar jobs. So far, no one has figured how to bring these jobs back.

[smitvict]

mnguyen4 - it is not true that most of the stimulus money is going to help the rich or the Wall Street Investor Class. Where do you make up this stuff? TARP went to Wall Street and the banks.

Stimulus went to states to delay layoffs of union workers (first responders, teachers, etc.) and to alleged "shovel ready" projects designed to bring civil service (and maybe some private) employment.

[pensacola8-2009]

There is no better way to divide a worker from their passion to work than to perpetuate spreading incendiary and divisive media that spoils motivation. The same goes for dividing an investor's passion to invest.

Negative media chokes our own throats. We have to survive. We have to invest in ourselves. We have to pay taxes. We have to work.

If you enlist or enroll the sensational media to tell you what to think or what you you say or do, you will never work, invest in yourself or others or never survive.

The sensational media flourishes when we, you, or anyone fails. Shun the sensational media and politics and seek the facts without seeing them through the polarized lenses of divisive ideologies.

Get busy living or get busy dying.

[rightbehind]

The country would be better off if Wall street was bulldozed.

[smitvict]

The muslims tried that on 9-11. I don't recall us being "better off". Typical left wing spam.