Stocks rose in afternoon trading Friday after Federal Reserve Chairman Ben Bernanke said the U.S. is on track for long-term economic growth.
Trading volume was light, a sign that many traders were leaving the New York area ahead of Hurricane Irene. The storm is expected to reach the region late Saturday night. A spokesman for the New York Stock Exchange said trading is expected to open as usual on Monday.
Bernanke announced no new economic stimulus measures during his speech at a conference in Jackson Hole, Wyo. He left open the possibility of more action by the Fed if another recession looks likely.
Indexes fell sharply as the speech was released and it became clear that Bernanke was not promising additional support of the economy. The Dow Jones industrial average was down about 78 points shortly before the speech started and slumped as many as 220 points shortly after Bernanke started speaking. It recovered those losses within an hour and stayed higher the rest of the day.
Optimism had been building on Wall Street this week that Bernanke might announce some kind of action Friday. Bernanke laid out plans for a bond-buying program at the same conference a year ago.
Half an hour before the closing bell, the Dow was up 92 points, or 0.8 percent, to 11,240. The Standard & Poor's 500 index rose 13, or 1.1 percent, to 1,172. The Nasdaq composite index rose 52, or 2.1 percent, to 2,471.
The S&P 500 is up 5 percent this week, putting the widely used index on track for its first weekly gain after a four-week losing streak. It would also be the biggest gain since the week that ended July 1.
Microsoft Corp led the 30 stocks that make up the Dow with a 3 percent gain. Tiffany & Co. rose 8 percent, the most of any of the 500 stocks in the S&P index, after the luxury retailer raised its profit forecast for the year.
In his speech, Bernanke focused on the long-term strengths of the U.S. economy, saying that they "do not appear to have been permanently altered by the shocks of the past four years." That shot of optimism helped lift markets. "In the American economy, the only thing that's really lacking right now is confidence," said David Kelly, chief market strategist at JPMorgan funds. Kelly said the Fed has few remaining options to help the economy, but action by the central bank might not be necessary. "People who understand the limits of monetary policy also understand that the economy has what it takes to grow," Kelly said.
Other analysts said that Bernanke's speech also helped lift investor sentiment. Liz Ann Sonders, chief investment strategist at Charles Schwab, said Bernanke's speech was an "acknowledgement that the Fed is not out of tools and that they stand ready" to act if needed.