Major U.S. stock indices recovered from earlier losses on Wednesday, shrugging off initial fears about Fed Chairman Ben Bernanke's exit plan for the Fed's current level of support for the financial system.
The S&P 500 Index was slightly lower by 0.11 points, or 0.01 percent, to trade at 1,070.41 at 3:06 p.m. The Dow Jones Industrial Average is down 5.90 points, or 0.06 percent to trade at 10,052.74. The Nasdaq Composite Index leads with a gain of 0.83 percent.
The Dow Jones U.S. Financials Index is up 0.92 percent. U.S. banks Goldman Sachs (NYSE:GS) is up 1.06 percent, Wells Fargo (NYSE:WFC) is up 2.15 percent, and JPMorgan up 1.59 percent.
U.S. banks stocks may have risen today due to easing fears of contagion from Greece's sovereign debt problems. However, major European banks, which have more exposure to Greece, are underperforming compared to U.S. banks. Deutsche Bank (NYSE:DB) is up only 0.79 percent and UBS (NYSE:UBS) up 0.16 percent.
The American Depository Receipts of National Bank of Greece (NYSE:NBG) lost some steam after their 20 percent gain yesterday; it is trading down 2.58 percent.
U.S. banks may have been lifted by President Obama's comments released today from excerpts of an interview with Bloomberg BusinessWeek. The President showed approval for JPMorgan CEO and Goldman Sachs CEO for taking their bonuses in stock instead of cash.
I, like most of the American people, don't begrudge people success or wealth. That is part of the free- market system, said Obama.
At 10:00 a.m. this morning, when Bernanke's testimony was released, the S&P 500 fell about 6 points in 10 minutes.
Bernanke said the Fed has spent considerable effort in developing the tools [they] will need to remove policy accommodation. The Fed will use these tools at the appropriate time, he said.
Investors may have shrugged off fears of tightening as stocks have rallied from their morning losses. The dollar gained against euro immediately after Bernanke's statements, but gave back all the gains by the afternoon U.S. session.
The initial reaction in stocks was lower as any talk of an exit strategy introduces an unknown to the market, said Brandon Rowley of T3 Capital.
As the market is digesting his testimony, investors are interpreting the current plans as very mild and far from extreme measures.
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