MARKET SAVVY : Markets Waver Amid the Mixed Signals on Interest Rates
A barrage of conflicting signals on interest rates kept investors off balance Wednesday, leaving the Dow Jones industrials little changed while most stocks ended with modest losses.
The Dow added 2.21 points to 11,036.34 after rallying at midday, selling off, then rebounding modestly.
But the Nasdaq composite lost 1% to 2,808.74. Losers outnumbered winners by 3 to 2 on the New York Stock Exchange and by 23 to 16 on Nasdaq.
Fear of higher interest rates, which has rattled stock and bond markets all summer, dominated trading again Wednesday. Stocks initially tumbled after the Bank of England increased its base lending rate from 5% to 5.25%, the first increase in more than a year, a surprise move that followed a string of seven cuts.
But the market rebounded as Federal Reserve Chairman Alan Greenspan delivered a speech to the Gerald R. Ford Foundation in Grand Rapids, Mich. While Greenspan discussed a wide range of topics, from the benefits of free market economies to the need for fairness in business, he did not address U.S. interest rates or inflation.
Instead, Greenspan praised the technological advances that have contributed to “the greatest prosperity the world has ever experienced.”
Greenspan’s speech heartened investors who eagerly parsed his words, seeking signs of the Fed’s future course on interest rates. The Fed has suggested it might be willing to raise rates for a third time this year if it determines inflation is accelerating.
“Everyone is trying to guess what the Fed might be thinking,” said Tim O’Neill, economist for the Bank of Montreal and Harris Bank.
But in a separate appearance Wednesday afternoon, Fed Gov. Laurence Meyer ended the burst of optimism. Meyer said he is unsure whether the U.S. economy is overheating, although he noted that wage pressures are building and said the case for a third rate increase is uncertain.
Still, Treasury bond yields ended little changed. The 30-year T-bond closed at 6.06%, down from 6.07% Tuesday.
The stock market’s midday boost was helped along by Abby Joseph Cohen, the bullish chief market strategist at Goldman, Sachs & Co., who raised her earnings estimates for the blue-chip Standard & Poor’s 500 index.
In commodity markets, many prices pulled back after surging Tuesday. Near-term crude oil futures added just 5 cents to $22.66 a barrel in New York after trading as high as $22.86.
The dollar continued to rebound against the yen, closing at 111.08 yen in New York, highest since Aug. 27. Treasury Secretary Lawrence Summers reiterated the U.S. commitment to a “strong dollar” but didn’t suggest any attempts to support the currency were imminent.
Among Wednesday’s highlights:
* Major tech stocks, many of which have been streaking higher recently, were hit by profit-taking. Intel fell $1.69 to $85.94, Microsoft lost $2 to $92.25 and Micron Technology slumped $4.13 to $75.50.
But Unisys added 63 cents to $45.13, and Vitesse Semiconductor gained $2.31 to $75.69.
* Some media stocks pulled back after rising Tuesday on the heels of the CBS-Viacom merger deal. Chris-Craft Industries lost 75 cents to $56.25, and Clear Channel fell $1.19 to $75.
But Time Warner added $1.31 to $63.56 and News Corp. gained $1.19 to $31.06.
* Global Crossing, which is building a worldwide undersea fiber network, soared $5.25 to $25.56 on news the company will sell 7% of its transpacific cable venture to Microsoft and Softbank for $350 million in cash to expand in Asia.
That news lifted Frontier $8.81 to $45.13. Global Crossing plans to buy Frontier, a long-distance phone company.
* Energy stocks, among this year’s biggest gainers, were mixed. Exxon gained $1.69 to $81.19 and Chevron added $1.25 to $94.44, but Texaco was off $1.06 to $65.69.
* Among other commodity-related companies, Georgia-Pacific added 56 cents to $44 and Alcoa gained 50 cents to $65.50.
* Two groups that lose as energy costs rise--airlines and utilities--continued to slide.
Delta Air Lines sank $2.13 to $48 and UAL, parent of United Airlines, lost $1.75 to $63.38.
The Dow Jones utility stock index slid 0.6%. It is up just 0.1% year to date, compared with the Dow industrials’ 20.2% gain and the Nasdaq composite’s 28.1% gain.
* Investors turned back to some classic consumer growth stocks. Colgate-Palmolive rose $1.81 to $58.38, Nike jumped $3.50 to $54.31 and Philip Morris rose $1.06 to $38.31.
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Market Roundup, C9
