The market has been in flux since May 22, when Bernanke said the Fed would consider pulling back on its bond-buying program if measures of the economy, especially hiring, improve. The comment, made not in prepared testimony but in response to a question from the Joint Economic Committee in Congress, was not expected. In the 17 trading days since then, the Dow Jones industrial average has swung by triple digits 11 times. Overall, the Dow is down about 1 percent since before Bernanke's testimony.
Jim McDonald, chief investment strategist at Northern Trust in Chicago, said Bernanke will seek to "walk back" on some of his previous comments, and reassure investors that the Fed won't pull back on stimulus until it's sure the economy is ready. The surprise factor, more than the substance of Bernanke's comments, might have been what unnerved investors, McDonald said.
"The market hates surprises," McDonald said. "And he surprised us."
The fact that Bernanke is now expected to regard the economy as weak enough to still need stimulus stems from two main data points issued since his testimony, analysts said: a jobs report and low inflation.
Earlier this month, the government reported that the U.S. added 175,000 jobs in May — a solid addition, but not enough to cut into the unemployment rate. And on Friday, the government said that a key measure of inflation — the producer price index, which measures wholesale prices — rose just 0.1 percent after stripping out the volatile costs of food and gas. That's important because the Fed knows that its stimulus measures can stoke inflation; if inflation is low, that gives the central bank more flexibility to keep pumping money into the economy.
Two measures of economic data released Monday were positive, though both are considered less-important gauges of the U.S. economy. A report on New York state manufacturing showed a pickup, and a survey of U.S. homebuilders said they were more optimistic about home sales than they have been in seven years.