NEW YORK (Reuters) - U.S. stocks gained on Friday on news that the European Central Bank is considering setting yield-band targets in a new bond- buying program that could help contain borrowing costs for Spain and other debt-laden euro-zone countries.
Investor sentiment received another lift from U.S. Federal Reserve Chairman Ben Bernanke, who said the Fed has room to deliver additional monetary stimulus to boost the U.S. economy. Bernanke made the comment in a letter to a congressional oversight panel.
Setting yield-band targets would let the ECB shield its strategy and avoid speculators trying to cash in, central bank sources told Reuters on Friday. Setting a band is an option gaining favor among central bankers, but the decision would not be made before the ECB's September 6 policy meeting, the sources said.
For the market, "the bigger backdrop is the monetary stimulus. What can really be done that hasn't happened already? In my mind, it's mainly the ECB and the emerging markets central banks that have more fire power," said Robin Thorn, head of global equities at PineBridge Investments in New York.
Gains were fairly broad-based, with the S&P financial index up .5 percent and the S&P consumer discretionary index up 0.7 percent.
The Dow Jones industrial average was up 76.33 points, or 0.59 percent, at 13,133.79. The Standard & Poor's 500 Index was up 7.05 points, or 0.50 percent, at 1,409.13. The Nasdaq Composite Index was up 14.06 points, or 0.46 percent, at 3,067.46.
Trading volume was expected to be low until the annual economic symposium at Jackson Hole, Wyoming, where Bernanke and ECB President Mario Draghi will speak next week.
In a letter to a congressional oversight panel on Friday, Bernanke said, "There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery."
Early in the day, the S&P 500 briefly fell below the 1,400 level following cautious comments from German Chancellor Angela Merkel about Greece staying in the euro zone.
It was the first time in two weeks that the benchmark S&P 500 had dipped below 1,400. The index hasn't closed below 1,400 since the first Monday of August. It was on track for only its first weekly decline in seven.
"Intermediate-term, weekly indicators, tracking one- to two-quarter shifts are not yet overbought and, in theory, have potential to carry equities higher into the fall," said Robert Sluymer, an analyst at RBC Capital Markets LLC, in New York.
Sluymer expects to see "at least one more upside attempt in September before sufficient evidence could conclude the intermediate-term rebound that began in June is failing."
Among gaining stocks, Supervalu (SVU.N) shares jumped 10.9 percent to $2.35 as the U.S. grocery company's advisers sought potential buyers to bid for the entire business, even as several suitors have inquired about its individual parts, according to a Bloomberg report.
On the downside were shares of Autodesk (ADSK.O), which fell 15.9 percent to $30.00. The stock was downgraded by various brokerages a day after the design software maker's quarterly results fell short of expectations for the first time in nearly two years.
On the data front, new orders for durable goods, which are long-lasting U.S. manufactured goods such as computers and aircraft, surged in July, even as declines in a gauge of planned business spending pointed to a slowing growth trend in manufacturing.
The mixed data added to the market's uncertainty on whether the Federal Reserve will act soon to bolster the economy.
(Additional reporting by Angela Moon; Editing by Dave Zimmerman and Jan Paschal)
Updated Date: Aug 25, 2012 01:15 AM