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The broad markets struggled to hold their ground Tuesday despite generally dovish testimony from Fed Chairman Bernanke and a round of strong economic data. The Dow posted solid gains on the back of rallying Home Depot shares.
As of 2:50 p.m. ET, the Dow Jones Industrial Average rose 102 points, or 0.74%, to 13886, the S&P 500 climbed 7.7 points, or 0.52%, to 1495 and the Nasdaq Composite gained 10.8 points, or 0.35%, to 3127.
In prepared remarks, Federal Reserve Chairman Ben Bernanke told Congress the benefits of highly-accommodative monetary policy clearly outweigh the potential risks, helping temper worries the Fed could end quantitative easing early.
"In the current economic environment, the benefits of asset purchases, and of policy accommodation more generally, are clear," he said.
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Peter Newland, and economist at Barclays, said in a note to clients that Bernanke's testimony suggests the Fed is still mulling over the risks of quantitative easing, but still judges it as valuable in the current economic climate.
Bernanke also said the job market remains weak, although the economic recovery appears to have picked up again early this year after taking a hit in the final quarter of 2012.
In addition to Bernanke's testimony, three economic reports greatly exceeded Wall Street's expectations.
Sales of new single-family homes jumped 15.6% in January from December -- the largest increase since April 1993 -- to a 437,000-unit annualized rate. The metric outpaced estimates of a 381,000-unit rate and marked the highest pace since July 2008.
The S&P/Case-Shiller composite index of 20 metropolitan areas shows home prices rose 0.2% on a non-seasonally adjusted basis in December, compared with the 0.2% fall economists were expecting. Prices were up 6.8% from a year ago, the biggest year-on-year increase since July 2006.
The Conference Board's gauge of U.S. consumer confidence rose to 69.6 in February from January, topping economists' estimates of 61 and marking the highest reading since November.
"An increase in consumer mood will help chain store sales in the coming months," Chris Christopher, head of consumer economics at IHS Global Insight wrote in a research note. "However, raising gasoline prices and the sequester are on many households' radar screens."
Italy Worries Still Present
After months on the back burner, European worries came hurdling back into the picture Monday after elections in Italy ended in a stalemate. The country's Senate now stands divided -- not a single party controls the upper house. That means multiple parties will have to come together and form a coalition government, or a fresh round of elections may need to be called.
More importantly, perhaps, the sudden lurch higher in political instability threatens to once again ignite concerns about the embattled 17-member currency bloc. Tina Fordham, an analyst covering the subject for Citigroup, called the election the "pivotal political event" for the eurozone this year, and warned that the result "extends political risk."
The broad S&P 500 took its biggest fall since November on the news Monday, while European markets have come under heavy pressure. Of particular concern is Italian and Spanish borrowing costs -- both of which have spiked in the secondary markets.
"We expect risky assets to remain under pressure until the picture in Italy becomes clearer," analysts at Barclays warned in a note to clients. The investment bank said safe havens like U.S. Treasury bonds, German bunds and the dollar should benefit.
On the corporate front, Home Depot (HD) posted quarterly results that topped expectations on the top and bottom lines. Shares of the Dow component jumped more than 2%. The stock added more than 20 points to the Dow's overall performance.
Oil futures were under pressure on the back of weakness in European markets. The benchmark U.S. contract dropped 71 cents, or 0.76%, to $92.40 a barrel. Wholesale New York Harbor gasoline sold off by 1.9% to $3.00 a gallon. In metals, gold rose $7.10, or 0.45%, to $1,594 a troy ounce.
The Euro Stoxx 50 plummeted 2.5% to 2586, the English FTSE 100 sold off by 1.3% to 6273 and the German DAX tumbled 1.8% to 7637.
In Asia, the Japanese Nikkei 225 plunged 2.3% to 11399 and the Chinese Hang Seng dropped 1.3% to 22520.