U.S. Stocks Climb After Bernanke Says Fed Prepared to Take Further Action

U.S. stocks rose, snapping a three- day slide for the Standard & Poor’s 500 Index, as Federal Reserve Chairman Ben S. Bernanke said he is prepared to further stimulate the U.S. economy and Chinese growth topped forecasts.

Commodity producers and industrial companies led gains in the S&P 500 as China’s economy grew more than forecast in the second quarter. Google Inc. (GOOG), Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX) climbed at least 1.1 percent as JPMorgan Chase & Co. began coverage of the companies with an “overweight” recommendation. Kinetic Concepts Inc. (KCI), a maker of wound-care products and hospital beds, jumped 5.5 percent after agreeing to be acquired for $4.98 billion.

The S&P 500 advanced 1 percent to 1,327.09 at 10:20 a.m. in New York. The Dow Jones Industrial Average increased 137.37 points, or 1.1 percent, to 12,584.25.

Bernanke told Congress the central bank is prepared to take additional action, including buying more government bonds, if the economy appears to be in danger of stalling.

“The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support,” Bernanke said in prepared testimony before the House Financial Services Committee in Washington today.

Equities gained after China said its economy grew 9.5 percent in the second quarter from a year earlier, after a 9.7 percent gain in the first quarter. That beat the median 9.3 percent estimate in a Bloomberg survey of 18 economists. Japan reported industrial production rose at the fastest pace in more than 50 years in May and retail sales declines eased for a second month.

'Back Into the Market'
“Buyers are coming back into the market because of the better economic news overnight,” John Augustine, who helps manage $25 billion as chief investment strategist at Fifth Third Bank in Cincinnati. “We got a better than expected GDP report from China and we had a strong industrial report from Japan.”

The S&P 500 has declined for the past three days as concern grew that Europe’s debt crisis will spread and American lawmakers failed to agree on cutting the deficit. The gauge had climbed 5.9 percent over the previous two weeks, the biggest gain since October 2009.

A late rally in U.S. stocks faded yesterday after Ireland’s downgrade to junk by Moody’s Investors Service added to concern Europe is losing control of the credit crisis and overshadowed evidence the Fed hasn’t ruled out more stimulus. Policy makers continued to debate whether additional support will be needed if the outlook for economic growth remains weak, minutes from the Federal Open Market Committee’s June meeting showed yesterday.

“The market is bouncing back on some positive economic reports after yesterday’s late sell-off following the downgrade of Ireland’s debt,” said Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which manages $85 billion. “But we’re still faced with a long-term debt issue in Europe and the U.S. and that means we will continue to have bouts of high volatility as these problems flare up.”

Investors will be turning more attention to earnings as the pace picks up for companies reporting second-quarter results. S&P 500 profits are forecast to have grown 13 percent in the quarter, the smallest increase in two years, according to data compiled by Bloomberg.