Greenspan Reassures Markets

Blue-chip stocks racked up their biggest one-day gain in four months and bonds rallied Thursday as investors were reassured by Federal Reserve Board Chairman Alan Greenspan’s comments that interest rates would probably remain steady for the time being.

The dollar was mixed.

The Dow Jones industrial average ended up 87.30 points at 5,464.18--its largest one-day gain since March 18 when it shot up 99 points.

Likewise, the Nasdaq composite index rose 23.17 points, or 2.13%, to 1,109.82 after closing up 33.18 points Wednesday--its biggest one-day rise in history.

“The perception now is that the Fed won’t do anything immediately,” said Eugene Peroni, chief technical analyst with Janney, Montgomery Scott. “The bond market got a nice shot in the arm and stocks rallied nicely.”

In the broader market, advancing issues beat declining issues 1,875 to 615 on active volume of 469 million shares on the New York Stock Exchange.

While bond prices gained on Greenspan’s comments that the Fed remained vigilant on inflation, stocks benefited from the perception that no rate increase was imminent.

The speculation recently was that the central bank would raise interest rates as soon as August after a jobs report for June showed unemployment fell to a six-year low and hourly earnings posted their biggest rise since record-keeping began 31 years ago.

Wall Street had expected Greenspan that would tip his hand during his semi-annual Humphrey-Hawkins testimony before the Senate, feeling that he would have to explain any move to Congress so soon before a national election.

“Even though the U.S. economy is using its productive resources intensively, inflation has remained quiescent,” Greenspan said.

The benchmark 30-year Treasury bond jumped more than a full point, and its yield, which moves in the opposite direction, fell to 6.93% from 7.03% at Wednesday’s close.

Meanwhile, interest rates on 52-week Treasury bills fell in Thursday’s auction to the lowest level in nearly two months. The average discount rate was 5.49%, down from 5.56% at the last auction on June 20. It was the lowest rate since 52-week bills averaged 5.32% on May 23.

Sales totaled $19.4 billion out of bids of $48.6 billion.

Technology issues, and the overall market, have been rocked since last week by dismal earnings or warnings from blue-chip technology shares, including Motorola, Hewlett-Packard and Texas Instruments.

But stronger-than-expected earnings reports from Intel on Tuesday and Apple Computer late Wednesday have somewhat restored the shaken faith of technology investors.

Among Thursday’s highlights:

* Shares of Apple surged 4 to 20 7/8, after the company reported a narrower-than-expected quarterly loss, setting off a rally in computer shares.

While Apple isn’t expected to be profitable until early next year, signs that the company may be overcoming its problems boosted computer shares.

Companies that depend on Apple also saw their shares increase. Global Village Communications, which makes modems for Apple machines, rose 1 1/4 to 8. Micro Warehouse, which sells software and other products, surged 3 1/2 to 20 and Macromedia, which makes software for Macintosh computers, rose 2 to 19 1/2.

* Trans World Airlines dropped 1 to 10 1/4 after a TWA 747 bound for Paris exploded in midair and crashed into the Atlantic Wednesday night with 228 people on board shortly after taking off from New York’s John F. Kennedy International Airport.

* Merck’s stock jumped after it said robust sales of its cholesterol-lowering drug Zocor helped second-quarter earnings jump 13%.

* Fast-food giant McDonald’s rallied 1 1/8 to 45 3/8 after it said earnings rose 11%, helped by rising sales at U.S. fast-food restaurants.

* Pinnacle Systems, the maker of video-editing equipment, lost 4 1/4 at 12 5/8 after the company said its biggest customer--Avid Technology--was cutting back on purchases of its product.

In currency markets, the dollar fell to 108.46 yen in late trading from 108.68 yen Wednesday on the outlook for higher Japanese interest rates.

Among commodities, growing concern about the quality of this year’s U.S. soft red winter wheat crop lifted nearby delivery prices. July wheat futures closed 5 1/2 cents higher at $4.83 a bushel on the Chicago Board of Trade.

London’s FTSE-100 index closed at the day’s highest level of 3,693.4, up 35.2 points and just short of a 1% rise on the day.

In Tokyo, the 225-share Nikkei average ended up 153.54 points at 21,566.42.

* TELLING TESTIMONY

Fed Chief suggests agency won’t raise interest rates. A1