Greenspan’s Remarks Send Dow Up 93.13
Blue-chip stocks closed sharply higher Wednesday after Federal Reserve Board Chairman Alan Greenspan’s latest comments eased worries that the central bank might be planning some action to slow the stock market’s rise.
The Dow Jones industrial average rose 93.13 points to close at 6,945.85. Broader stock measures also rallied as the bond market snapped its recent slump, halting a worrisome climb in interest rates.
As bonds rose, the yield on the 30-year Treasury sank from late Tuesday’s 6.86%, the highest finish since late January, to about 6.82%.
With no major economic reports to elaborate on the inflation outlook, investors spent much of the session awaiting Wednesday afternoon’s appearance by Greenspan before the House Banking Committee.
Although he reiterated his readiness to raise the Fed’s key lending rates to keep a lid on inflation, Greenspan’s remarks were seen as less strident than last week’s report to the Senate Banking Committee, in which he warned that unrelenting investor optimism poses an inflationary risk.
“We don’t view monetary policy as a tool to . . . prick the stock market bubble, or something like that,” he said.
The comments stood in contrast to last week, when Greenspan’s testimony was peppered with reflections on speculative bubbles in the stock market. His testimony triggered an almost uninterrupted decline in stocks that pulled the Dow industrials down by 185 points in a week.
However, as he has often done in the past, Greenspan used the second session of his semiannual report on the economy to soften his tone, and markets responded with a bounce.
Advancing issues outnumbered decliners by more than a 5-to-3 margin on the New York Stock Exchange in heavy trading.
Among Wednesday’s highlights:
* The improved interest rate backdrop boosted financial services issues. J.P. Morgan rose 2 1/2 to 107 7/8 as one of the Dow’s big gainers, while Citicorp surged 4 to 122 1/8.
The Dow’s other big gainers included Boeing, up 4 3/8 to 104 5/8, Merck, up 3 1/4 to 94, and General Electric, up 2 1/4 to 103 5/8.
* The technology sector continued to show signs of recovery. Intel rose 3 1/8 to 149 1/2, Microsoft rose 1 3/4 to 100 7/8, Micron Technology gained 2 1/2 to 42 3/8, Cypress Semiconductor advanced 1 to 14 3/8 and National Semiconductor gained 2 1/4 to 30 3/4.
* Corporate Express slid 8 3/16 to 10 1/8 and Broderbund Software plunged 7 3/8 to 23 1/8 on a warning of disappointing results.
In commodities trading, gold prices fell sharply following news of a Swiss plan to set up a fund to compensate victims of the Holocaust to be financed by selling Swiss gold reserves. April gold fell $6.10 to $354.50 an ounce at New York’s Commodity Exchange after earlier dropping as low as $352.50.
