Stocks rise as Bernanke says Europe’s woes should amount to only ‘modest’ knock on US economy

Stocks climb as Bernanke says recovery continues

NEW YORK — The Dow Jones industrials climbed back above 10,000 Wednesday after Federal Reserve Chairman Ben Bernanke said debt problems in Europe might only amount to a “modest” drag on the U.S. economy if the financial markets can halt their slide.

Bernanke’s comments encouraged investors to continue the buying they began on Tuesday. The Dow rose about 80 points in afternoon trading, bringing its two-day advance to about 205.

Bernanke told the House Budget Committee that the economy is still recovering but that jobs and housing are likely to remain weak.

“We do put the odds pretty high that Bernanke is correct and that this is more short-term blip than anything else,” said David Chalupnik, head of equities at First American Funds in Minneapolis. He referred to the sharp drop in the market that began more than a month ago.

The market also got a lift from a stronger euro, which rose back above $1.20. The move in the 16-nation currency past that psychological level was a sign of increasing confidence in Europe’s ability to contain its debt problems.

Industrial stocks climbed after Caterpillar said it would boost its dividend by 2 cents to 44 cents. Shares of the maker of construction and mining equipment rose 2.4 percent. Technology shares rose after Texas Instruments Inc. said demand for chips from its customers in Europe hadn’t fallen. The stock gained 0.9 percent.

Shares of BP dropped 12.7 percent after a news report quoted an energy industry analyst as saying the company could be forced to seek bankruptcy protection in about a month because of the oil spill in the Gulf of Mexico.

Traders have been anxious since last month about the health of Europe’s economy. Governments across Europe are planning deep spending cuts to reduce debt. The worry is that lower spending there will slow down an economic recovery in Europe, which in turn could put a drag on other regions. Major stock indexes have fallen into a “correction,” which is a drop of more than 10 percent from their recent highs.

Investors found some optimism in a news report that China is expected to post better-than-forecast export data later this week. That is driving hopes that Europe’s debt problems won’t derail strength in Asia.

The latest climb in the market wasn’t necessarily a sign that traders had put their worries about Europe behind them. Bernanke’s comments, likewise, raised hopes for the economy but traders have in the past month been quick to dismiss his restrained optimism about the economy.

“People are saying ‘OK, maybe we can tiptoe back in.’ Nevertheless, there is still a lot of concern out there,” said Benny Lorenzo, CEO of Kaufman Brothers in New York.

In midafternoon trading, the Dow rose 82.83, or 0.8 percent, to 10,022.97 after rising 123 on Tuesday. The Dow fell below 10,000 on Friday. Dropping below that threshold brought fears that the market would continue to tumble.

The Standard & Poor’s 500 index rose 9.07, or 0.9 percent, to 1,071.07, while the Nasdaq composite index rose 23.51, or 1.1 percent, to 2,194.08.

Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 706 million shares, compared with 824 million shares traded at the same point Tuesday.

Bond prices mostly fell, driving interest rates higher. The yield on the benchmark 10-year Treasury note rose to 3.21 percent from 3.19 percent late Tuesday.

Gold prices retreated Wednesday after setting a record high a day earlier. Gold fell $17.60 to $1,228.00 an ounce. It rose as high as $1,254.40 an ounce on Tuesday.

Crude oil rose $2.67 to $74.66 per barrel on the New York Mercantile Exchange.

In economic news, the government reported that inventories at wholesalers grew for a fourth month in April, while sales posted a 13th straight increase. Wholesale inventories increased 0.4 percent, while sales rose 0.7 percent. The gains were essentially in line with analysts’ expectations. Investors hope improved demand will prompt businesses to increase orders and help revive the economy.

Among stocks, Caterpillar Inc. rose $1.38, or 2.4 percent, to $57.99, while Texas Instruments Inc. climbed 22 cents, or 0.9 percent, to $24.10.

BP PLC fell $4.40, or 12.7 percent, to $30.27.

Britain’s FTSE 100 rose 1.2 percent, Germany’s DAX index and France’s CAC-40 each rose 2 percent. Japan’s Nikkei stock average fell 1 percent.