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Wall Street Jumps On Good Manufacturing, Google News

Fri, 10/15/2010 - 4:36am
Stephen Bernard, AP Business Writer

NEW YORK (AP) — Stock futures jumped Friday after Federal Reserve chairman Ben Bernanke reiterated the central bank is ready to do more to stimulate the sluggish economy.

Bernanke's comments were the latest confirmation of what is already widely expected: The central bank is about to ramp up its purchase of Treasury bonds to spark growth.

Upbeat economic reports were also adding strength to the market. Retail sales climbed in September by more than economists had forecast. Manufacturing activity in New York surged in October and pointed to continued expansion in the coming months.

Nasdaq 100 futures got an extra lift from Google Inc., whose shares skyrocketed after the Internet search giant reported a big jump in earnings. A disappointing drop in revenue at General Electric Co. hurt its shares and were a slight drag on other indexes.

Ahead of the opening bell, Dow Jones industrial average futures rose 40, or 0.4 percent, to 11,092. Standard & Poor's 500 index futures rose 4.80, or 0.4 percent, to 1,178.30, while Nasdaq 100 futures rose 10.25, or 0.5 percent, to 2,072.25. Futures had been pointing to a small decline in stocks Friday before Bernanke began his speech in Boston.

The Fed has hinted in recent weeks it would resume a program it ran during the recession to stimulate the economy. The program is aimed at driving interest rates down from already low levels in an effort to spark borrowing and spending by companies and consumers.

More spending, could in turn, would lift corporate sales and lead to more jobs. High unemployment remains one of the biggest drags on the economy.

Stocks have been rallying in recent weeks in anticipation the Fed would announce a firm plan at its next meeting, which wraps up Nov. 3. Lower rates have helped stocks because it drives down yields on Treasury bonds. That makes stocks and other riskier investments like commodities more attractive. It also weakens the dollar, which has been pummeled in recent weeks.

The dollar is hovering near a 15-year low against the yen and is approaching its 2010 low against the euro.

Bernanke said Friday the central bank is still trying to figure out how big the bond purchase program should be. Its size could further affect trading in the coming weeks.

Any action by the Fed could have the dual effect of increasing inflation. Bernanke said inflation still remains too low by historical standards. If rates drop and borrowing and spending pick up, prices would rise.

The government said Friday that the consumer price index, a measure of inflation at the retail level, rose just 0.1 percent last month. Prices were flat excluding volatile food and energy costs.

Bond prices were trading in a tight range after Bernanke's speech. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.52 percent from 2.51 percent late Thursday. Its yield is helped to set interest rates on mortgages and other consumer loans.

Google shares jumped $58.69, or 10.9 percent, to $599.62. GE shares fell 36 cents, or 2.1 percent, to $16.80.

In other earnings news, shares of toy maker Mattel Inc. dropped 8.1 percent after it also failed to meet revenue forecasts. It fell $1.95 to $22.05.

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