Stocks Rise as Greenspan Again Gives ‘Thumbs Up’
Stocks rose modestly Wednesday in heavy trading, lifting some indexes to new highs, as Federal Reserve Board Chairman Alan Greenspan again chose not to play spoiler to the market’s upbeat outlook on inflation and interest rates.
The Dow Jones industrial average rose 26.71 points to 8,088.36, padding Tuesday’s record close.
But the Dow had been as high as 8,147 before pulling back, in a volatile session.
Most broad-market indicators also pushed higher after retreating from what initially looked to be a continuation of Tuesday afternoon’s surge. Winners topped losers by 17 to 12 on the NYSE, but only by 21 to 20 on Nasdaq.
The Nasdaq composite index added 3.79 points to 1,567.65, but remains below its recent record high of 1,580.63.
Greenspan, who had sparked Tuesday’s 155-point Dow gain by painting a basically glowing picture of the U.S. economy in testimony before a House committee, gave a repeat performance before a Senate panel on Wednesday, reinforcing hopes that Aug. 19’s Fed meeting won’t produce any increase in interest rates.
Meanwhile, other top Fed officials testified before House members. “The economy as a whole is functioning amazingly well,” Fed Vice Chairwoman Alice Rivlin told the House Banking Committee.
Fed board member Laurence H. Meyer agreed, calling the economy’s recent performance “extraordinarily favorable.” He said he did not foresee “any obstacles to the continuation of the [economic] expansion . . . through 1998.”
On Wall Street, “The market’s path of least resistance is still higher, but [Wednesday] was a more thoughtful, critical [advance] than Tuesday’s unanimous celebration of what [Greenspan] was saying,” said Richard E. Cripps, chief market strategist for brokerage Legg Mason of Baltimore.
Stocks may have been held back by the bond market: After diving to seven-month lows on Tuesday, bond yields edged up on Wednesday. The 30-year Treasury bond yield closed at 6.43%, up from 6.41% Tuesday.
While many bond investors remain optimistic about the outlook for bonds, “a lot of good news is already priced into the market,” said David Schroeder, who manages about $2 billion in bonds for American Century Benham in Mountain View, Calif.
At the Treasury’s auction of new five-year notes on Wednesday, the average yield was 6.02%.
Among Wednesday’s highlights:
* Second-quarter earnings reports again drove stocks. Among companies reporting, DuPont rose $1.44 to $67.63, AlliedSignal jumped $1.06 to $92.25, Ingersoll-Rand gained $1.06 to $63.50 and Bay Networks surged $2.63 to $31.88.
But 3M dropped $1.81 to $98.50 on its disappointing report.
* Among tech issues, Computer Associates surged $5.25 to $69.56 as the software maker’s profit improved a better-than-than expected 30% in the recent quarter.
Meanwhile, personal computer stocks rocketed anew, with Compaq surging $6.88 to $138.38 and Dell Computer gaining $4 to $164.
But other tech issues were mixed. Microsoft eased $2.69 to $141.44. Netscape Communications slumped $4.88 to $39.63 on worries about rising marketing and research expenses, in the wake of its second-quarter earnings report.
* Brokerage Lehman Bros. zoomed $6.81 to $52 on rumors it may get a takeover bid from Chase Manhattan.
In foreign trading, Latin American markets continued to rebound, with Mexico’s key index up 1.9% to 4,742.12 and Brazil’s up 1.6% to 12,427.
