Greenspan’s Moderate Views on Rate Hike Buoy Stocks
Stocks extended their latest rally Thursday after Federal Reserve Chairman Alan Greenspan indicated that only a modest interest rate hike may be needed to keep inflation well-tamed.
The Dow Jones industrial average closed up 56.68 points, or 0.5%, at 10,841.63, building on a nearly 190-point climb Wednesday after the government reported flat consumer prices in May.
Broader stock indexes also advanced Thursday, helped by falling bond yields.
The technology-dominated Nasdaq composite index gained 26.32 points, or 1%, to 2,544.15. On Wednesday, the index rocketed 4.3%.
Winners topped losers by 18 to 12 on the New York Stock Exchange and by 21 to 17 on Nasdaq.
“The markets were relieved that the Fed is finally going to do something, but it won’t be too drastic,” said Eugene G. Mintz, financial markets analyst at Brown Bros., Harriman & Co.
Also, Greenspan didn’t issue any dire warnings about the stock market, as he has done in the past, Mintz noted.
In his testimony, Greenspan said that while it is unclear that the stock market’s current high prices represent a speculative “bubble,” an end to Wall Street’s long ride needn’t have catastrophic consequences for the economy.
Many analysts say strong second-quarter earnings reports could help Wall Street get over what is expected to be a quarter-point rate hike when the Fed meets June 29 and 30.
Among Thursday’s highlights:
* Most Internet stocks continued to rebound, but the gains were more modest than on Wednesday. Inktomi rose $4.19 to $113 and America Online added $4.19 to $110.69, but Yahoo edged up just 63 cents to $142.25 and EBay fell $2 to $146.75.
* Major tech shares were mixed in the wake of more bad news from Compaq. Compaq managed to edge up 25 cents to $22.50, but Intel fell $1.69 to $58 and IBM eased 50 cents to $120.19. Dell added 69 cents to $36.50.
Adobe Systems surged $2.13 to $76 in after-hours trading after reporting strong earnings.
* Bank stocks continued to rally as bond yields fell. Bank One rose $1.19 to $56.63, Bank of America jumped $2.06 to $71.75 and Golden West Financial was up $1.50 to $96.
* Consumer growth stocks were mixed, with Gillette off 44 cents to $47.31 and Clorox down $1.25 to $95.63. After the market closed, Gillette said its current-quarter earnings will be below estimates.
* Investment Technology Group, which runs off-exchange stock trading systems, tumbled $2.59 to $31.03. Brokerage CIBC World Markets downgraded the stock to “hold” from “strong buy.”
Market Roundup, C6
