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Stocks Flip Again as Hilsenrath Channels His Inner Bernanke

Tickers in this article: C KMX MS ORCL ^DJI ^GSPC ^IXIC

NEW YORK (TheStreet) -- U.S. stocks flipped again Friday turning upward after Wall Street Journal reporter Jon Hilsenrath wrote that "markets might be misreading the Federal Reserve's messages."

Hilsenrath, the Journal's well-sourced reporter who covers the Federal Reserve, wrote that investors were over-reacting to Chairman Ben Bernanke's comments on Wednesday that the central bank would begin reducing its giant bond-buying program by the end of the year. The story sought to emphasize comments that Bernanke made at Wednesday's press conference that the bank would prefer investors contemplate before selling their positions.

In the wake of Bernanke's Wednesday press conference, long-term interest rates have spiked while nd interest-rate futures contracts dropped, an indications that investors are concerned the Fed is poised to raise short-term interest rates in the near future.

The S&P 500 was gaining 0.3% to 1,592.44 at 1:22 p.m. after falling as low as 1,577.70 and spending the early morning as high as 1,599.19. The Dow Jones Industrial Average was adding 0.2% to 14,790.07.

"Mr. Bernanke emphasized that even though the Fed might pull back on bond-buying later this year -- which is akin to easing your foot off the gas pedal of a car -- it would be a long time before it took the more aggressive step of raising short-term interest rates -- which is akin to pressing the brake," Hilsenrath wrote.

Hilsenrath also sought to temper investor fears of an impending hike in borrowing costs and a corresponding spike in mortgage rates, which could deflate the country's nascent housing recovery, writing that "Mr. Bernanke suggested the Fed could keep short-term interest rates near zero even longer than previously planned."

The Nasdaq was tumbling 1% to 3,330.11 as Oracle plunged 8.5% to $30.38 after reporting flat fourth-quarter revenue growth that included sluggish-looking cloud business results.

Morgan Stanley and Citigroup shares were both down, with Citigroup shares off 4% to $46.05 and Morgan Stanley shares shedding 2.9% to $24.44. Morgan Stanley has received regulatory approvals to complete its purchase of brokerage joint venture Morgan Stanley Smith Barney from Citigroup in a move CEO James Gorman characterizes as a "historic day" for the nation's second-largest standalone investment bank.

U.S. stocks plunged the most in 19 months Thursday on fears the Fed is working on plans to reduce its bond-buying stimulus program. Bernanke's comments also lent credence to the notion that interest rates may be adjusted upward, that mortgage rates, currently at historic lows, could follow as well.

Written by Andrea Tse in New York

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