Greenspan, Oil Leave Stocks Flat
Stocks ended nearly flat Wednesday after a roller coaster session that saw shares climb on bullish testimony from Federal Reserve Chairman Alan Greenspan about the state of the economy, only to be knocked down by anxiety over high-priced oil.
Greenspan was upbeat about the economy in remarks to the House Budget Committee and did not suggest there would be any major changes in the Fed’s monetary policy -- a welcome relief to rate-wary investors. But the short-term cheer over his comments was not enough to allay the market’s deeper concerns, particularly as crude futures rose $1.37, to $53.05 per barrel, on fears that global demand will outpace supply.
The Dow Jones industrial average shed 18.03 points, or 0.2%, to 10,811.97, closing off its intraday high of 10,869.83 -- a level the Dow hasn’t touched since June 2001.
The broader gauges also ended the day lower. The Standard & Poor’s 500 index edged down 0.33 point to 1,210.08. Nasdaq fell 3.75 points, or 0.2%, to 2,067.50.
Five stocks fell for every four that rose on the New York Stock Exchange. Almost 1.6 billion shares changed hands on the Big Board, 3.9% more than the three-month daily average.
In his remarks, Greenspan emphasized the importance of congressional action on Social Security and said hiking taxes now would be negative for the economy. His remarks had little effect on the bond market, with the yield on the benchmark 10-year note inching up to 4.38% from 4.37% on Tuesday.
In part, bond traders appeared reluctant to make major bets before Friday’s payroll report for February.
The dollar rose against the euro as Greenspan declared that the U.S. economy “appears to be expanding at a reasonably good pace.” The euro fell to $1.313 from $1.318 on Tuesday. The dollar is up 3.3% this year on expectations that the Fed will add to six interest-rate increases since June, while the European Central Bank keeps its benchmark rate unchanged.
“There’s no doubt the U.S. economy is in much better shape than Europe,” said Paresh Upadhyaya, a currency specialist at Putnam Investments in Boston. “That is in great part why we are seeing some support to the dollar at the start of the year.”
In other market highlights:
* A rally in energy shares kept benchmark indexes from falling further. An index of oil and gas producers in the S&P; 500 rose 1.2%. Energy stocks are the broad benchmark’s best-performing group this year, climbing 20%.
Exxon Mobil added 58 cents to $62.68. ChevronTexaco advanced 63 cents to $61.57. Valero Energy rose $1.71 to $69.77.
* MCI was up 9 cents at $23.45 after the long-distance provider’s merger partner, Verizon Communications, said MCI could have two weeks to examine a bid from Qwest Communications International. The announcement came a day after Qwest executives made a direct appeal to MCI to reconsider its $8-billion bid, which tops the Verizon offer. Qwest was down 12 cents at $3.93, while Verizon rose 22 cents to $36.47.
* American Eagle Outfitters rose $3.57 to $58.87 after its fourth-quarter profit nearly tripled as same-store sales rose sharply. Earnings of $1.32 a share beat by 7 cents the average forecast by analysts surveyed by Thomson First Call. Costco Wholesale fell $1.69 to $45.02 after its earnings missed Wall Street estimates by a penny, excluding charges.
* Lear slid $5.76 to $47 a day after the automotive interior systems supplier slashed its first-quarter earnings forecast, citing industry production cuts. Several brokerage houses cut their ratings on the stock. AutoZone gained $1 to $98.33 after its second-quarter profit rose more than 30% thanks to a tax benefit, lower costs and a boost in sales because of lower fuel prices.
* Novellus Systems, which makes machines used in semiconductor manufacturing, slid $1.28 to $28.90 on expectations of a slowdown in Japanese demand for its products.
