Stocks Erase Gain on Bernanke Comments

By Nikolaj Gammeltoft and Victoria Stilwell

Ben S. Bernanke, chairman of the U.S. Federal Reserve, pauses during his semiannual report on monetary policy to the Senate Banking Committee in Washington, D.C. on July 14, 2011. Photographer: Brendan Smialowski/Bloomberg

U.S. stocks were little changed as Federal Reserve Chairman Ben S. Bernanke said he’s not prepared to take immediate action to stimulate the economy, wiping out an early rally triggered by earnings at JPMorgan Chase & Co. (JPM)

Industrial companies and raw-material producers were the biggest drags on the market among the 10 main industries in the Standard & Poor’s 500 Index, which erased a gain of as much as 0.7 percent. JPMorgan rallied 3 percent to lead gains in the Dow Jones Industrial Average after investment banking profit surged and more customers paid their credit-card bills on time.

The S&P 500 slipped less than 0.1 percent to 1,316.68 at 11:38 a.m. in New York. The Dow rose 5.86 points, or less than 0.1 percent, to 12,497.47 after surging 90 points earlier.

Bernanke testified for a second day before lawmakers after saying yesterday he’s prepared to provide more stimulus if needed. Bernanke said today that inflation now is “higher” and “closer” to the central bank’s informal target than was the case in August and that’s one reason why the Fed won’t immediately embark on a third round of bond- buying.

“We’re not prepared at this point to take further action,” he told the Senate Banking Committee.

The S&P 500 has rallied 95 percent since March 2009 as the Fed used large-scale asset purchases to buoy the economy and companies posted earnings that beat analysts’ estimates. The index has still fallen 3.4 percent since April 29 this year on concern the economic recovery is at risk and as Europe’s sovereign-debt crisis grows.

Stocks were also pressured after Moody’s Investors Service said late yesterday the U.S. government may lose the Aaa credit rating it’s held since 1917 on concern the country’s debt limit will not be raised in time to prevent a missed payment of interest or principal. President Barack Obama is considering summoning congressional leaders to Camp David this weekend to work on a plan to raise the debt ceiling after yesterday’s negotiations on a deficit-cutting plan of at least $2 trillion stalled, two people familiar with the matter said.