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Stocks ended higher, buoyed by a proposal by President Bush to help sub-prime homeowners and a speech by Federal Reserve Chairman Ben Bernanke, who did not dispel beliefs that a rate cut will come in September. Investors and analyst continue to expect a 25-basis-point rate cut at the Sept. 18 FOMC meeting.

Today, the Dow Jones industrial average closed up 119.01 or 0.90% to 13,357.74, the broader S&P 500 closed up 16.35 or 1.12% to 1,473.99, and the Nasdaq Composite closed up 31.06 or 1.21% to 2,596.36. For the week, the Dow gained 1.2%, the S&P 500 posted a slim decline of 0.4%, while the Nasdaq rose about 0.7%. For the month, the Dow gained 1.1%, the S&P rose 1.28%, and the Nasdaq climbed 1.1%.

Market breadth was positive and volume was light. On the New York Stock Exchange, winners beat losers by 7 to 1 on volume of 1.39 billion shares. On the Nasdaq, advancers topped decliners by 2 to 1 on volume of 1.57 billion shares.

Encouraging comments from Bernanke and President Bush seemed to soothe markets, calming worries about the turmoil in the credit and mortgage markets. Speaking at an economic symposium, Fed chief Bernanke discussed the recent turmoil in credit, mortgage and financial markets and again implied that the central bank was prepared to cut rates, if needed. Bernanke also acknowledged how this has impacted financial markets, which have struggled all summer amid
investor worries about these issues. He said that the economic picture was more uncertain going forward and that the Fed would continue to monitor it and adjust policy as needed.

In economic news, personal income and spending both rose more than expected in July. However, core inflation grew less-than-expected, despite the jump in earnings and expenditures. The Chicago PMI, rose to 53.8 in August from 53.4 in the previous month. July factory orders rose 3.7% in the month after rising 1% in June. Economists had expected orders to rise 3%.

Stock of Dell closed down $0.21 to $28.25, despite reporting quarterly earnings and revenue that rose from a year ago and topped forecasts. It reported a 46% rise in profits, but left analysts with mixed views about how it is likely to perform during a period of large-scale restructuring.

Shares of Accredited Home Lenders closed up $2.74 or 43% to $9.05, after proposed buyout partner Lone Star Funds said it was prepared to buy the mortgage lender after all, but at a lower price. Lone Star said it wanted to pay $8.50 a share, representing a 35% premium over the most recent closing price of $6.31. However, this is well below the $15.10 a-share deal that Accredited Home agreed to on June 4.

U.S. light crude oil for October delivery rose 68 cents to settle at $74.04 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter