U.S. economy continues to be at risk

Stocks around the globe returned to positive territory Thursday, a day after European fear sparked steep losses. Europe's woes, however, remain a clear and present danger to the fragile U.S. economic recovery.

U.S. blue chips had fallen almost 400 points Wednesday on fears that soaring borrowing costs for Italy could push it into a crippling debt default. Those fears waned a bit Thursday as a new coalition government seemed to be taking form and there was more clarity from Italian lawmakers over promised economic reforms.

Borrowing costs remain elevated for Italy, a nation with a $2.6 trillion deficit and about $300 billion in borrowing needs over the next year or so. On Wednesday, Italy was forced to pay investors a 7.6 percent rate of return on its 10-year bonds, well above the 7 percent threshold at which other European nations were forced to seek rescue packages.

Investors eased up on Italy on Thursday, and the rate of return on the benchmark 10-year bond fell to 6.873 percent, slightly below the danger zone.
With Italy calming, U.S. stocks recovered some lost ground. The Dow Jones industrial average closed up 112.92 points to 11,893.86, while the S&P 500 rose by 10.60 points to 1,239.70. The NASDAQ gained 3.50 points to end at 2,625.15.

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Fed's low rates pledge supports global stocks

A pledge by the Federal Reserve to keep extremely small interest rates for another couple of years has calmed investors' jitters, sending stock markets approximately the world higher Wednesday, The Fed's surprise announcement Tuesday that it would likely stay its Fed funds rate at near zero percent through 2013 to help the ailing U.S. economy help Wall Street surge late in the session — the Dow Jones industrial average rallied 6 percent just in the last hour of trading, one of the biggest turnarounds ever seen.

That continued into the Asian and European trading sessions, even though traders remained nervous after the market turmoil of recent weeks, which has sent several global markets officially into bear market territory — falling 20 percent from recent peaks, "There is an consequence of technical rebound but it is too early to say that the crisis is in excess of, or that's the end of the crash," said Olivier de La Ferriere, a fund manager at KBL Richelieu in Paris.

Wall Street was poised to give up a few of Tuesday's late gains — Dow futures were down 0.6 percent at 11,123 even as the broader Standard & Poor's 500 futures fell an equivalent rate to 1,165.Worries over the U.S. economic recovery include been building over the past couple of weeks ever since the government revealed so as to the world's largest economy has been growing far more weakly in the initial half of 2011 than economists expected.

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Bernanke: Fed would supply more stimulus if needed

Federal Reserve Chairman Ben Bernanke thought Wednesday that the central bank is prepared to provide additional incentive if the current U.S. economic lull persists.Delivering his twice-a-year economic statement to Congress, Bernanke laid out three options the central bank would consider.

Bernanke said the Fed could launch an additional round of Treasury bond buying, the third such effort since 2009. It could cut the notice paid to banks on the reserves they hold as a way to encourage them to lend more.The Fed could also be extra explicit in spelling out just how long it planned to keep rates at record-low levels. That would give investors assurance about the Fed's efforts to carry on supporting the economy.

Stocks jumped after Bernanke signaled the Fed's willingness to take extra steps to boost the sluggish economy. The Dow Jones industrial regular rose 150 points, or 1.2 percent, in morning trading and broader index gained.

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