US stocks rally after Bernanke inflation comments01:28,...

US stocks rally after Bernanke inflation comments
01:28, Thursday, 20 July 2006

(Updates to late morning)

By Ellis Mnyandu

NEW YORK, July 19 (Reuters) - U.S. stocks jumped to their
biggest one-day percentage gain in three weeks on Wednesday
after Federal Reserve Chairman Ben Bernanke said he saw core
inflation moderating in the coming quarters.

Investors interpreted the Fed chief's comments before the
Senate Banking Committee as hinting at a possible pause in
interest-rate increases. For details, see [ID:nWAT006066].

Bank stocks rallied after news of strong earnings from
JPMorgan Chase & Co. , the No. 3 U.S. bank, and Bank of
America Corp. , the second largest U.S. bank. Morgan's
shares rose 5 percent and Bank of America was 2.5 percent
higher.

International Business Machines Corp. led gains on
the Dow after it posted a strong profit late on Tuesday.

"Market players are viewing that the Fed will be on hold
from raising rates in August and this is what is propelling the
equity markets," said John Person, president of
Nationalfutures.com, an investment advisory service.

The Dow Jones industrial average <.DJI> was up 157.92
points, or 1.46 percent, at 10,957.15. The Standard & Poor's
500 Index <.SPX> was up 19.28 points, or 1.56 percent, at
1,256.14. The Nasdaq Composite Index <.IXIC> was up 25.73
points, or 1.26 percent, at 2,068.95.

But Yahoo Inc. bucked the trend of positive
financial results. The Internet media company gave a
disappointing revenue outlook, sending its stock falling 19
percent to $26.04, making it the biggest percentage loser on
Nasdaq.

Bernanke told the committee the central bank remained
worried about pricey oil and tight labor markets and the risk
they might foster expectations for rising prices.

Interest rate futures pointed to reduced chances that the
Fed will hike rates in August by 25 basis points to 5.50
percent after Bernanke spoke.

Analysts said fighting in the Middle East remained a major
concern for markets because of the risk of widening conflict
that could propel crude oil prices higher.

JPMorgan said its second-quarter profit tripled.
[ID:nN19191900]. After the close on Tuesday, IBM reported a
stronger-than-expected quarterly profit.

JPMorgan shares rose 4.8 percent to $42.65, while shares of
IBM, the world's largest computer services company, rose 3.5
percent to $76.85. IBM shares were the biggest advancer on the
Dow, while JPMorgan bolstered the S&P advance.

Bernanke and the strong earnings news overshadowed a report
from the Labor Department showing a bigger-than-expected 0.3
percent rise in the core Consumer Price Index.
(Additional reporting by Doris Frankel in Chicago)
((Reporting by Ellis Mnyandu