* World stocks rise, along with U.S. equities
* Bernanke offers no new measures to boost growth
* Wall Street raises cash in preparation for Irene
* Oil edges up, bonds pare gain (Updates prices, adds details, quote)
By Caroline Valetkevitch
NEW YORK, Aug 26 (Reuters) - World stocks surged and the dollar fell on Friday after Federal Reserve Chairman Ben Bernanke left the door open for future U.S. economic stimulus.
Speaking at the Fed's annual retreat in Jackson Hole, Wyoming, Bernanke did not offer new measures to boost the economy but said it was critical for the economy's health to reduce long-term joblessness. For details, see [ID:nLDE77P0JC] http://r.reuters.com/qyt43s
U.S. stocks rose strongly, reversing initial losses of as much as 2 percent, while Treasuries, whose yields are at near-historic lows, extended gains.
Bernanke said the central bank's policy panel would meet for two days in September instead of one to discuss additional monetary stimulus, offering some hope to investors for further action down the road.
"He didn't give the market the green light for QE3 -- he also didn't give the market the red light for QE3," said Kevin Caron, market strategist at Stifel, Nicolaus in Florham Park, New Jersey, referring to the Fed's quantitative easing program.
"By implying that inflation is viewed as not a concern, it leaves the possibility for something down the road," he added.
The speech follows several turbulent weeks for markets, with investors facing concerns about another U.S. recession and escalating euro zone debt troubles, as well as a downgrade of the top-tier U.S. credit rating.
World stocks as measured by the MSCI world equity index
<.MIWD00000PUS> were up 1 percent, but are down 11.1 percent
since the start of the month, while Brent crude
Bernanke's speech last year laid the groundwork for the Fed's $600 billion bond-buying program to revive the economy under the rubric "QE2" for the Fed's second round of stimulus, or quantitative easing.
The dollar gained on the euro after the speech but later
shed those gains, with the euro
An increase of money supply, such as the QE2 program, tends to erode the value of the dollar relative to other currencies.
On Wall Street, the Dow Jones industrial average <.DJI> was up 140.17 points, or 1.26 percent, at 11,289.99. The Standard & Poor's 500 Index <.SPX> was up 17.24 points, or 1.49 percent, at 1,176.51. The Nasdaq Composite Index <.IXIC> was up 53.82 points, or 2.22 percent, at 2,473.45.
WALL ST PREPARES FOR IRENE
Wall Street scrambled to raise cash in case Hurricane Irene causes major disruption in trading for thousands of traders who live in the New York, New Jersey and Connecticut.
The repurchase market, a major source of cash for Wall Street to fund trades and operations, showed an increase in interest rates on loans that mature on Monday, a sign markets are worried there could be disruptions - however temporary - as a result of the hurricane.
Interest rates on loans backed by Treasury bonds that expire on Monday rose by several hundredths of a percentage point from late Thursday to about 0.08 percent in the $1.6 trillion repurchase market.
In the U.S. Treasury market, benchmark 10-year Treasury
notes
"I think that seeing Treasuries come off a little bit here, you're seeing some bets being unwound in the market," said Rich Bryant, a Treasury trader at MF Global Securities in New York.
"There were some bets in the market that there was an outside chance that something more concrete could be announced today," he said.
Gold was higher, fueled by safe-haven buying. Spot gold