Stocks Mixed, Rates Up on Eve of Greenspan II
Wall Street careened through a strange session Tuesday, with bond yields rising and stocks closing mixed as investors awaited the second part of Federal Reserve Chairman Alan Greenspan’s congressional testimony on the economy.
Meanwhile, the dollar surged to a 34-month high against the German mark, and coffee rocketed past $2 a pound in commodity trading.
In the stock market, the Dow Jones industrials slumped 66.20 points to 6,852.72, the lowest close since Feb. 10.
But broader indexes were mixed. The Nasdaq composite index of mostly smaller stocks gained 6.19 points to 1,317.37. And rising stocks outnumbered losers by 14 to 11 on the New York Stock Exchange.
Blue-chip stocks traded higher for much of the session but succumbed to selling in the final hour as bond yields rose again.
Bond traders were aggravated by another batch of strong economic reports. The 30-year T-bond yielded ended at 6.86%, up from 6.83% on Monday.
Given the latest data, “the pressure is firmly on the Fed to tighten” credit by raising short-term interest rates, said Mark Ficke, a government bond trader at Morgan Stanley & Co.
In congressional testimony Tuesday, the Fed’s Greenspan talked mainly about the consumer price index and the need to revise it. He made only brief reference to the economy, although his comments were fairly upbeat.
But Greenspan will have more to say about the economy--and, presumably, about the Fed’s concerns about rapid growth--today when he goes before a House committee for the second part of his periodic report to Congress on economic trends. In the first part of that testimony, a week ago, Greenspan made pointed comments about the stock market’s surge this year and about the threat posed by financial bubbles.
On Tuesday, under questioning by one House Republican, Greenspan denied that he was trying to “talk down” the stock market.
“That’s not what I was intending to do,” he said, later arguing that he was incapable of affecting the fundamental course of the market.
“These are very thick, elaborate, international markets which are driven by decisions of millions of people,” Greenspan said. “Nobody can affect them in a fundamental way.”
But in currency trading Tuesday, the dollar’s gain against the German mark was chalked up partly to expectations of higher U.S. interest rates. The dollar closed at 1.714 marks, up from 1.698 on Monday and the highest since 1994.
Other factors drove coffee prices higher: March coffee futures in New York zoomed 13.20 cents to $2.12 a pound, the highest since October 1994, on concern that a planned dockworkers strike in Brazil will slow exports from the world’s largest grower.
Among Tuesday’s highlights:
* Gains in airline, rail and trucking stocks boosted the transport sector, on optimism about stronger earnings in a healthier U.S. economy. UAL, parent of United Air Lines, zoomed 4 1/4 to 64 1/8, Yellow Freight jumped 1 3/8 to 17 1/8 and CSX added 1 1/4 to 50 1/4.
* A modest rally in key tech stocks helped boost Nasdaq. Vitesse Semiconductor jumped 2 1/4 to 32 3/4, Cisco Systems added 1 1/2 to 55 3/4 and Micron Technology gained 1 3/8 to 39 7/8.
* The Dow was led lower by GM, which fell 2 to 57 1/4 on news of disappointing February car sales. Ford lost 1 1/8 to 32 and Chrysler sank 1 5/8 to 32.
* Drug stocks also pressured blue-chip indexes, as profit takers hit the shares. Merck slumped 2 3/4 to 91 1/4 and Pfizer lost 2 1/2 to 90 1/8.
* A rebound in oil stocks kept the Dow from a deeper loss. Texaco rose 3 to 101 3/4 and Exxon added 3/4 to 100.
* Analyst upgrades boosted Westinghouse Electric, up 1 1/4 to 19, and McDonald’s, up 3/4 to 44 1/8. But AT&T; lost 7/8 to 36, falling for a second day after management warned that rising competitive pressures will depress earnings.
