Equities Rise as Bernanke Mulls Monetary Policy Measures

Equities are off to a strong start to the year, with the Dow up 89 points, or 0.9%, at 10,517.07, the S&P 500 up 11.52, or 1%, at 1,126.68, and the Nasdaq up 31 points, or 1.38%, at 2,300.

Among the things pushing shares higher were remarks yesterday at the American Economic Association’s annual meeting in Atlanta in which Fed chairman Ben Bernanke implied raising interest rates remains an option to prevent asset bubble.

After discussing at length the role of monetary policy in preventing or abetting the housing bubble, Bernanke remarks that tightening rates shouldn’t be the first line of defense to prevent bubbles, instead it should be regulation. But then he concedes that monetary policy should also be an option, stating, “if adequate reforms are not made, or if they are made but prove insufficient to prevent dangerous buildups of financial risks, we must remain open to using monetary policy as a supplementary tool for addressing those risks.”

In related news, Fed Reserve vice chairman Donald Kohn, speaking at the same meeting, said the Fed must withdraw its stimulus funds from the economy “well before a recovery.”