The US equity markets receive a lift today after dovish comments from Ben Bernanke in his testimony before congress. The S&P 500 Index increased by 10.6 points today to 1105. The crude oil market rallied $1.25 and the Euro moved up slightly to 1.3525. The S&P 500 Index is having a difficult time with strong resistance in the form of the 50 day moving average.
In his semi –annual testimony before congress, Federal Reserve Chairman Ben Bernanke said the U.S. economy still needs record-low interest rates for several months at least because the recovery from its deep recession is expected to be slow. In his testimony to the House Financial Services Committee, the Fed chief said the U.S. central bank is actively looking at what tools to use once the economy needs higher rates. Market participants celebrated the news that rates would continue to be low for an extended period of time.
Also of note, The Securities and Exchange Commission voted 3-2 Wednesday in favor of a final rule that will curb short selling for individual securities that decline at least 10% in a single day. The vote brings an end to almost a year of debate over the practice, in which investors attempt to profit by selling borrowed shares of a stock that is losing value.
In economic news, U.S. sales of new homes fell 11.2% in January, setting a record low and erasing all gains in the market for new homes during the past year, as the economy recovers from recession. Demand for single-family homes fell 11.2% from the previous month to a seasonally adjusted annual rate of 309,000, according to the Commerce Department. Economists surveyed had estimated sales would rise 3.8%, to 355,000. It was the third drop in a row. Sales in December fell 3.9%, revised from an originally reported 7.6% decline. The new-home sales report is volatile because it is based on a particularly small sample. The government said it was 90% confident that the true change in new-home sales in January was between minus 25.2% and plus 2.8%. The 11.2% decrease carried sales to their lowest level since records began in 1963.
In Asia, Chinese officials appear to be clamping down on Beijing real estate. According to a Chinese based newspaper, the Beijing city government has halted a program that had supported the real estate market. According to the paper, the city will implement a 40% down payment requirement on property purchases and scrap incentives for foreigners to buy property. These incentives were introduced in late 2008. This is consistent with Chinese official concerns about potential bubbles in some sectors including real estate.