The economy has “decelerated somewhat” in the first half of the year, according to Federal Reserve chairman Ben Bernanke, who testified on Capital Hill Tuesday without giving any hints that the Fed is planning further easing.
That prompted a mid-morning sell-off in U.S. stocks, although the equity markets rebounded and ended Tuesday’s trading session back in positive territory.
Overseas markets were mixed.
In Asia, Japan’s Nikkei 225 rose 0.4 percent to 8,755, while Hong Kong’s Hang Seng Index climbed 1.8 percent to 19,455.33.
In Europe, the DAX in Frankfurt was the only index to post gains.
The German market closed up 0.2 percent to 6,577.64, while the FTSE MIB in Milan fell 0.9 percent to 13,536.73 and the FTSE 100 in London retreated 0.6 percent to 5,629.09. The CAC 40 in Paris, meanwhile, sank 0.1 percent to 3,176.97.
In the U.S., the Dow Jones Industrial Average ended the day up 0.6 percent to 12,805.54, following an intraday trading range of 12,645.10 to 12.829.23. The S&P Retail Index gained 0.3 percent to 610.31.
In his testimony to the Senate Banking Committee — the Fed’s semiannual report to Congress — Bernanke provided no new details about what moves the central bank might take to offer additional monetary support to jump-start employment and ensure price stability.
“Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to the economic outlook, the Committee made clear at its June meeting that it is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” Bernanke said.
Bernanke told members of the Senate Banking Committee, “The recovery in the United States continues to be held back by a number of other headwinds [in addition to the financial strains from the crisis in Europe], including still-tight borrowing conditions for some businesses and households…the restraining effects of fiscal policy and fiscal uncertainty.” He warned that the reduction in unemployment rate, currently at 8.2 percent, will likely “be frustratingly slow,” citing forecasts in the 7 percent range or higher at the end of 2014.
Bernanke also repeated his words from testimony in February, noting that the FOMC “expects that economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”