Stocks Rally as Wall St. Applauds Greenspan Speech
The Nasdaq composite index soared to a high in record trading, leading a broad stock market rally Friday that was fueled by tumbling bond yields.
The bond market, in turn, was cheered by Federal Reserve Chairman Alan Greenspan’s suggestion that the Fed’s two interest rate hikes this year seem to be keeping inflation under control.
The remarks raised hopes that the central bank may not see the need to push short-term interest rates much higher.
On Wall Street, the Dow Jones industrial average closed up 107.33 points, or 1%, at 10,729.86, adding to its 227.64-point surge on Thursday and bringing the week’s gain to 2.5%.
The Nasdaq composite rocketed 91.21 points, or 3.2%, to close at a record 2,966.43--well above its previous record close of 2,915.95 reached Oct. 11.
The rally came on the 70th anniversary of the 1929 stock market crash, when the Dow plunged 11.7% in a single session--the beginning of the Great Depression.
October has been a tough month for stocks in the years since, with huge sell-offs in both 1987 and 1997. Traders were glad to put the month behind them, especially in Friday’s fashion.
Eric Remole, managing director at Credit Suisse Asset Management, noted that Greenspan’s statements before a meeting of business executives Thursday night dramatically buoyed sentiment.
“His comments indicated he seems to agree with the new paradigm story that productivity can sustain higher growth rates without triggering an increase in inflation,” Remole said.
Greenspan said the economy is likely to stay on a sustainable, noninflationary path, helped by productivity gains, though he warned consumer demand could speed up so much it outstrips productivity improvements.
While the Fed chief’s comments are always subject to interpretation, some traders rushed into bonds on Friday, pushing yields down from near-two-year highs.
The benchmark 30-year Treasury bond yield tumbled to 6.16% from 6.26% Thursday. Earlier this week the yield hit 6.4%.
But the dollar slid as investors focused instead on brightening economic prospects for Europe and Japan. It fell to 104.16 Japanese yen from 105.04 Thursday.
In the stock market, advancing issues outnumbered decliners by an 11-5 margin on the New York Stock Exchange. Big Board volume was extremely heavy at 1.37 billion shares. Nasdaq, meanwhile, set a volume record, at 1.437 billion shares.
Foreign markets were lifted by Wall Street’s new strength. Japan’s Nikkei stock average rose 3%, Germany’s DAX index gained 1%, Britain’s FT-SE 100 rose 1.7%, and France’s CAC-40 soared 3%.
Among Friday’s highlights:
* Shares of Intel rose $5.25 to $77.44 after the world’s largest maker of computer chips said production this year will not be disrupted by the earthquake in Taiwan or the year 2000 computer problem. Intel’s announcement late Thursday helped the rest of the chip industry. Applied Materials rose $6.06 to $89.81, and Sun Microsystems gained $7.19 to $105.81.
* Shares of Akamai Technologies, a maker of technology used to boost the efficiency of the Internet, soared in an initial public offering. Akamai was priced at $26 a share, opened at $110, and closed at $145.19 on Nasdaq, the fourth-biggest gain in history for a stock making its IPO.
* Paper stocks were a bastion of strength Friday, benefiting from positive comments from Merrill Lynch analysts. International Paper rose $4.19 to $52.63, contributing the most to the Dow average’s advance. Willamette gained $4.25 to $59.88, and Weyerhauser jumped $4.06 to $59.69.
* EToys plunged $12.31, or 17%, to $58.31 after Goldman, Sachs & Co., which handled the company’s initial stock offering, said it will allow company insiders to sell 9.5 million shares earlier than expected.
* Infoseek gained $2.44 to $31.31, and Go2Net rocketed $9.81 to $66.81. The two Internet companies on Thursday reported huge sales gains for the third quarter.
* American Express fell $5.69 to $155.31 after analysts at PaineWebber and other brokerages cut ratings on the credit card issuer, saying its earnings growth doesn’t justify a further stock price rise.
* Lockheed Martin shares fell $2.94 to $20 after the defense conglomerate slashed its earnings estimate for the next year, prompting it president to announce his retirement.
Market Roundup, C4
