Bank stocks led the S&P 500 Index in Wednesday's rally as Fed Chairman Bernanke reiterates his commitment to low interest rate and offered an optimistic view of the financial markets.
The S&P 500 Index closed with a gain of 10.64 points, or 0.97 percent, at 1,105.24. The Dow Jones Industrial Average closed up 91.75 points, or 0.89 percent, at 10,374.16.
The tech heavy Nasdaq Composite closed up 1.01 percent as major tech companies, with the notable exception of Google (NYSE:GOOG), generally closed up more than 1 percent.
While tech gains were impressive, Wednesday's market rally was largely driven by the financial sector.
The Dow Jones U.S. Financials Index gained 1.60 percent. Bank of America (NYSE:BAC), up 2.45 percent, and JPMorgan (NYSE:JPM), up 2.43 percent, were the two leading components of the Dow.
Fed Chairman Ben Bernanke, using similar phrases from previous testimonies, pledged to keep interest rates low on Wednesday.
Economic conditions, said Bernanke, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations...are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
Bernanke also noted that conditions in the financial markets continued to improve, with conditions in short-term funding markets returning to near pre-crisis levels. Credit conditions for big corporations are also improving.
The financial sector received its first vote of confidence last week when the Fed Reserve raised the borrowing rate from the discount window by 0.25 percent. The discount window is a source of emergency funding for banks.
Banks' reliance on the discount window as a source of funding had already declined dramatically.
Many market participants interpreted the 0.25 percent hike mainly as a sign of the Fed's increased confidence in the financial system.
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