Greenspan’s Remarks Deflate Early Rally
Blue chips gave up an early rally Tuesday as bond yields surged after Federal Reserve Board Chairman Alan Greenspan’s latest comments on the economy.
Although the Fed chief did not suggest that the central bank is ready to raise interest rates any time soon, many bond investors were hoping he would sound more accommodating.
On Wall Street, a rally that boosted the Dow industrials as high as 9,611 faded as Greenspan spoke, and the index closed off 8.26 points at 9,544.42--a bland performance after it jumped 212 points Monday.
The broad market was mixed. Losers topped winners by 17 to 13 on the New York Stock Exchange and by 21 to 19 on Nasdaq, but a surge in technology and Internet stocks lifted the Nasdaq composite 1.5% to 2,376.35 points.
The bond market had a far worse day. The yield on the bellwether 30-year Treasury bond jumped to 5.43% from 5.36% Monday, and now is the highest since August.
Greenspan shook bond traders by acknowledging that there is some question about whether the three Fed rate cuts made late last year remain “appropriate” now that global markets have calmed.
But he also conceded that there is “no evidence of any upturn in inflation.” Still, “the worry here is that a strong economy will ignite inflation and interest rates have to go up,” said Michelle Clayman, chief investment officer at New Amsterdam Partners.
In the stock market, the technology sector seemed immune to interest-rate jitters.
Internet and computer shares rallied after Morgan Stanley Dean Witter’s Mary Meeker, one of the leading Net analysts, said “the long-term outlook is phenomenal” for Microsoft, Amazon.com, Yahoo and EBay.
The analyst said she expects favorable financial reports from online companies in March. Microsoft, meanwhile, “will only have its wrists slapped” in the U.S. antitrust trial, according to a summary of the comments she made to Morgan Stanley’s sales force.
Some equity investors were actually encouraged by Greenspan’s remarks. “He sees the economy growing at a nice steady pace, and he isn’t afraid of inflation,” said Uri Landesman, a manager with J.P. Morgan Investment Management.
Among Tuesday’s highlights:
* Microsoft soared $6.63 to $155.44. Among other big-name techs, Intel rose $1.44 to $134.25, Compaq gained $1.56 to $44.25 and Dell rose $2.19 to $87.06.
* In the Net sector, EBay rose $3.88 to $282.63 after surging $39.25 on Monday. Other winners included Yahoo, up $7.13 to $152.88; Amazon.com, up $8.69 to $115.19; Excite, up $8.88 to $102.38; and Doubleclick, up $8.53 to $97.44.
* The biotech sector also got a boost. Immunex rocketed $20.81 to $158.56 after setting a 2-for-1 stock split.
* Bookseller Barnes & Noble tumbled $4.56 to $31.19 after it said fiscal-year earnings won’t meet expectations as it increases spending on its Internet business in light of slower growth prospects at its superstores.
* Nordstrom slid $2.19 to $41.69 after the upscale department store chain’s earnings report disappointed Wall Street.
* America West Holdings lost $3.25 to $18.13 after calling off talks to be bought by UAL Corp.
* Among Southland issues, Whittaker, an aircraft components maker, zoomed $2.44 to $20.06 after the company said it hired two Wall Street investment banks to evaluate offers it received to sell all or part of the company.
Market Roundup, C9
