Is Bernanke a White House sop to stock market bulls?
It may not have been a rousing "welcome back," but Wall Street’s reaction to Ben S. Bernanke's renomination as Federal Reserve chairman shows the White House got the job done -- if the job was to help keep the bulls in control of financial markets.
The Dow Jones industrial average rallied as much as 110 points, or 1.1%, in the first hour of trading, after President Obama announced his decision to leave Bernanke at the helm of the central bank.
Major stock indexes faded by day’s end but still ended in the black and at their highest levels in at least nine months. The Dow closed up 30.01 points, or 0.3%, to 9,539.29, the highest since Nov. 4.
Bernanke’s renomination had been widely expected, so the timing seemed a bit peculiar. Why would Obama feel the need to interrupt his family vacation to make the announcement?
One theory is that the White House figured the news was what Wall Street wanted -- and that by announcing it now, the administration would help underpin the stock market’s stunning summer gains.
The Dow is up 17% since July 10, lifted by economic data that have generally been better than expected.
Obama’s decision removes a potential element of uncertainty that could have given nervous investors an excuse to sell as we near September, which historically has been the stock market’s worst month of the year.
The last thing the administration and the Fed need is a market meltdown next month. Rightly or wrongly, a plunge in stock prices could destroy faith that the economy is on the cusp of a sustained turnaround, and make a slide back into recession a fait accompli.
Investors may well find other excuses to sell soon, but they won’t be able to cite confusion about who’ll be in charge at the Fed.
-- Tom Petruno
Photo: Fed Chairman Ben S. Bernanke and President Obama at the announcement today. Credit: Alex Brandon / Associated Press