Upbeat Report by Greenspan Boosts Stocks
A bullish assessment of the economy by Federal Reserve Chairman Alan Greenspan sent stocks moderately higher Tuesday but failed to give the market a major spark.
Greenspan praised the economy’s overall health in testimony before the Senate Banking Committee. However, the Fed chairman warned again that the central bank would keep a close eye on inflation, and would aggressively raise interest rates if needed.
The mixed message left the major indexes trapped within a fairly narrow range.
“Unfortunately right now, I think investors need time to get acclimated to the economic environment going forward -- rising rates, the earnings growth slowdown, things like that,” said Scott Wren, equity strategist for A.G. Edwards & Sons.
The Dow Jones industrial average rose 55.01 points, or 0.6%, to 10,149.07.
Broader stock indicators were markedly higher. The Standard & Poor’s 500 index was up 7.77 points, or 0.7%, at 1,108.67, while the Nasdaq composite index advanced 33.24 points, or 1.8%, to 1,917.07.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange.
Many investors were on the sidelines, waiting to see Microsoft’s earnings, to be released late Thursday. After the regular session ended Tuesday, the software maker announced a special one-time dividend of $3 a share and also said it would double its annual dividend to 32 cents a share.
Microsoft, which finished the regular session up 37 cents at $28.32, surged to nearly $30 in extended trading.
In other markets highlights:
* Yields on U.S. Treasuries rose as traders interpreted Greenspan’s optimism on the economy as a signal that the central bank could raise interest rates more quickly than anticipated. The yield on the benchmark 10-year note rose to 4.45%, from 4.36% on Monday.
* Oil prices ended lower Tuesday after volatile trading linked to the expiration of the August delivery contract. Oil closed at $40.86 a barrel, down 78 cents from Monday, after jumping as high as $42.30 earlier in the day.
* An index of retailers had the second-biggest gain among the S&P; 500’s 24 industry groups, rising 2.2%. The companies got a boost from lower oil prices. Home Depot, the No. 1 home-improvement retailer, added 72 cents to $33.99.
* Corning led gains among technology companies, climbing $1.42 to $12.69. Second-quarter profit, excluding some items, of 11 cents a share beat the 9-cent average estimate of analysts surveyed by Thomson First Call.
Cisco Systems added 52 cents to $21.88, and Yahoo rallied $1.28 to $29.39.
* Adolph Coors, the No. 3 U.S. brewer, added 94 cents to $76.50. Coors and Molson, Canada’s biggest beer maker, said they were in “advanced discussions” on a possible merger that could help the two attempt to keep pace with consolidation of their industry. Molson was up 4.6% in Toronto.
* Delta Air Lines slumped 54 cents, or 9.1%, to $5.40, for the steepest drop in the S&P; 500. S&P; cut the No. 3 U.S. airline’s bond rating to CCC-plus from B-minus, citing an increasing risk of bankruptcy. On Monday, the carrier reported a second-quarter net loss of $1.97 billion because of costs for pilot pensions, fuel and writing off tax benefits.
* Taser International, the largest U.S. maker of stun guns, dropped for a second day, sliding $5.28 to $31.04. The New York Times reported Sunday that the weapons were connected to about 50 deaths. Taser said it “strongly refutes” the story.
* Ford lost 38 cents to $14.60. The automaker said third-quarter profit won’t meet analysts’ expectations.
