Dow Soars 155 to New High on Greenspan’s Midyear Report
The Dow Jones industrial average roared back above 8,000 Tuesday as Federal Reserve Board Chairman Alan Greenspan delivered a midyear report to Congress without firing any warning shots at the markets.
The Dow rose 154.93 points to 8,061.65, erasing the remainder of Friday’s 130-point slide and beating last Wednesday’s record close of 8,038.88, which was the blue-chip barometer’s first trip above 8,000.
Broader indicators also posted big gains, although most indexes were shy of last week’s record highs.
“This was definitely a relief rally,” said Phil Orlando, chief investment officer at Value Line Asset Management. “I think there was concern over the last couple of days that we’d see the ‘Irrational Exuberance II’ speech.”
Greenspan’s Fed moves are seen as among the few potential threats to the near-ideal market conditions that have catapulted the stock market to new highs. While there’s little fear that the Federal Reserve will try to slow the economy with a boost in interest rates at next month’s strategy meeting, investors were bracing for Greenspan’s remarks, which have been known to rattle the markets.
As usual, the Fed chairman warned Tuesday that the central bank won’t hesitate to hike its lending rates if any inflationary pressures emerge. But his fairly mild tone was taken as a green light in the markets.
“He’s taken the only potential negative blip off anybody’s radar screen,” said John Cleland, chief investment strategist at Security Benefit Group in Topeka, Kan., noting there are few major economic reports due in the near term.
As bonds rallied after Greenspan’s speech, the yield on the 30-year Treasury fell to 6.41%, the lowest level since Dec. 4.
Among market highlights:
* Stocks drew a boost from some robust earnings reports by bellwether names such as Disney, Philip Morris, RJR Nabisco and PepsiCo.
Disney rose $2.44 to $77.63 and Philip Morris rose $2.13 to $42.67 as two of the Dow’s biggest gainers. But IBM, which had risen in advance of late Monday’s mostly upbeat earnings report, slipped 75 cents to $103 as one of the Dow’s few decliners. PepsiCo rose $2.50 to $38.06, and RJR rose $1.06 to $30.88.
* Boeing Co. climbed two points to $56.88 after the company offered a set of last-minute concessions to the European Commission in hopes of winning approval for its planned merger with McDonnell Douglas Corp. McDonnell Douglas shares rose $3.63 to $71.75.
* Big-name technology shares sprang to life after three days of profit-taking on that sector’s recent rally. Intel rose $3.06 to $88.75, Microsoft rose $8.31 to $144.25, and Dell Computer rose $7.38 to $160 to lead the Nasdaq advance.
Meanwhile, wheat prices jumped Tuesday, boosted by news that Egypt had bought 450,000 metric tons from the United States.
Egypt’s official commodities buyer said he bought the U.S. soft red winter wheat for delivery in August.
Wheat for September delivery rose 10 cents to $3.50 a bushel at the Chicago Board of Trade.
Wheat prices fell to their lowest levels in three years earlier this month as harvests in key growing states such as Kansas and Oklahoma produced larger crops than most had expected. The drop in prices slowed sales to a trickle, another factor supporting the current recovery, dealers said.
