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After opening higher today, the Dow is retreating. Ben Bernanke offered testimony before Congress today, focusing on economic recovery policy, and outlining an economic stimulus exit strategy designed to prevent inflation. The Financial Times reports on part of Bernanke’s remarks today:

“We…believe that it is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed,” he said.

The Fed could raise the interest paid on reserve balances to help set a floor on interest rates, Mr Bernanke said, and even sell its long-term securities should it prove necessary. However, he emphasised that the Fed does not plan to implement this while the economy remains fragile.

The news hasn’t seemed to put much confidence in the stock market, though, since stocks are falling now that reports of Bernanke’s remarks are being distributed. U.S. Treasury bonds, on the other hand, are rallying on the news, reports MarketWatch:

“The bond market seems to be rallying on Bernanke’s comments on an exit strategy, and perhaps on relief that changes are not imminent,” said analysts at Action Economics.

The news seems to indicate that economic recovery is not imminent, and that means that investors are not ready to take the big risks. This is sending the stock market lower, since perhaps some Wall Street types were hoping that Bernanke would focus on positive earnings and indications that economic recovery is eminent. However, Bernanke kept his comments conservative and cautious, prompting investors to acknowledge that maybe they have been overly exuberant in recent days.

Some of today’s losses are probably also due to profit taking after a couple sessions of solid gains.

Disclaimer: I am not an investment professional. Nothing in this piece or on this Web site should be construed as investment advice. Before making investment decisions, do your own research and/or consult with an investment professional. All investment comes with the risk of loss. You are responsible for your own investment decisions and any loss that may result from your decisions.