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Greenspan remarks
prompt uncertaintyThe Dow Jones gained 55
while the S&P was up nearly 8
NEW YORK >> A bullish assessment of the economy by Federal Reserve Chairman Alan Greenspan sent stocks moderately higher yesterday but failed to give the market a major spark in what was generally a quiet session.
Greenspan's testimony before the Senate Banking Committee, in which he praised the economy's overall health, cheered investors somewhat. However, the Fed chairman did warn again that the central bank would keep a close eye on prices and inflation, and would aggressively raise interest rates if necessary.
Because Greenspan's message was mixed, it couldn't help the market find a direction; Wall Street has seen mostly sluggish trading in an uninspiring earnings season, and the major indexes were again trapped within a fairly narrow range yesterday.
"Unfortunately right now, I think investors need time to get acclimated to the economic environment going forward, rising rates, the earnings growth slowdown, things like that," said Scott Wren, equity strategist for A.G. Edwards & Sons. "I don't think earnings will be the story here unless they really disappoint. It's purely a matter of time for us to break out of this slump."
The Dow Jones industrial average rose 55.01, or 0.6 percent, to 10,149.07.
Broader stock indicators were markedly higher. The Standard & Poor's 500 index was up 7.77, or 0.7 percent, at 1,108.67, while the Nasdaq composite index advanced 33.24, or 1.8 percent, to 1,917.07.
The price of the benchmark 10-year Treasury note dropped 1116 point and its yield, which moves in the opposite direction, rose to 4.44 percent from 4.36 percent. The 2-year note slipped 532 point to yield 2.62 percent, up from 2.52 percent on Monday.
Greenspan's testimony came after a disappointing housing report from the Commerce Department. Construction began on 1.8 million units in June, an 8.5 percent drop from May and the lowest level in more than a year. Combined with rising interest rates, a dip in consumer spending and profit warnings from major corporations for the rest of the year, the lack of activity in the construction sector gave investors more to worry about.
"Investors are really looking for a sign of things to come right now, and they're not getting it in earnings," said Brian Pears, head equity trader at Victory Capital Management. "The market, barring that one big bellwether diversified company that says something big, doesn't have a direction, and that explains the lack of conviction we've seen over the past couple of weeks."
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