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Greenspan view lifts
Dow to 2- 1/2 year high
NEW YORK >> Investors anxious to get back into the stock market jumped on Federal Reserve Chairman Alan Greenspan's bullish economic report yesterday, sending stocks soaring and propelling the Dow Jones industrial average up 123 points to its highest level in more than 2 1/2 years.
Greenspan, in testimony before a House committee, gave a better-than-expected assessment of inflation and the overall economy and reiterated the Fed's current stance that it could remain patient before eventually raising interest rates.
Investors, having sat on the sidelines for weeks amid uncertainty about the economy, responded to Greenspan with a wave of buying. The Dow Jones industrial average gained 123.85, or 1.2 percent, to 10,737.70. It was the highest the Dow has been since June 13, 2001, and is less than 1,000 points shy of the index's record close of 11,722.98, set Jan. 14, 2000.
Broader stock indicators also rose sharply. The Standard & Poor's 500 index was up 12.22, or 1.1 percent, at 1,157.76. The Nasdaq composite index climbed 14.33, or 0.7 percent, to 2,089.66. The Russell 2000 index of smaller companies was up 4.24, or 0.7 percent, at 597.07.
Advancing issues outnumbered decliners by nearly 2 to 1 at the New York Stock Exchange, where consolidated volume came to 2.24 billion shares, compared to 1.79 billion at the same point Tuesday.
The price of the Treasury's 10-year note closed up 23/32 point, while its yield fell to 4.02 percent from 4.11 percent Tuesday. Two-year Treasury notes were up 3/16 point and yielded 1.71 percent, down from 1.80 percent Tuesday.
Stocks drew the most momentum from the Fed's lowered inflation estimate, which fell by 0.25 percentage point from its projection of last July.
"That in particular tells me that the Fed is not really concerned about inflation," said Jeff Kleintop, chief investment strategist for PNC Financial Services Group. "I think it's positive for stocks in that it will keep rates low for a longer period of time."
While Greenspan stated that interest rates would eventually have to rise to combat inflation, investors were apparently satisfied when he did not give a timetable for a rate hike. They also ignored his warning that increasing federal budget deficits could hurt the economy.
Wall Street was also digesting a surprise $54 billion bid by cable company Comcast Corp. for the Walt Disney Co. The entertainment giant's embattled chief executive, Michael Eisner, spurned a private offer from the cable company, which has now taken its bid public in hopes of gaining shareholder support. Comcast dropped $2.70 to $31.23. Disney jumped $3.52, or 15 percent, to $27.60.
Insurer American International Group Inc. posted a profit of $1.03 per share for the fourth quarter after suffering a loss the year before. AIG rose 85 cents to $74.35.
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