Greenspan comments boost US stocks
Most US stocks closed higher today after Federal Reserve Chairman Alan Greenspan said the economy has weathered the increase in oil prices “reasonably well”.
Earlier in the session, stocks fell after consumer confidence hit its lowest point in two years, raising fears that US shoppers might cut their spending and slow the economy.
But Greenspan calmed investors by emphasizing “the incredible resilience of the US economy in terms of flexibility,” said Lynn Reaser, chief economist for the investment strategy group at Bank of America.
Speaking to the National Association for Business Economics in Chicago, Greenspan emphasized that before policymakers respond to disasters, markets react through prices, interest rates and exchange rates, which work together to cushion the economy.
That was just what investors wanted to hear after the Conference Board said its consumer confidence index dropped even more than analysts expected, falling 18.9 points in September for a reading of 86.6, down from 105.5.
Economists were expecting a reading of 98. With consumer spending driving the economy, the dive in sentiment after Hurricanes Katrina and Rita could dampen sales of everything from cars to cashmere.
The Dow Jones industrial average rose 12.58, or 0.12%, to 10,456.21.
Broader stock indicators were slightly lower. The Standard & Poor’s 500 index rose 0.03, or 0%, to 1,215.66, and the Nasdaq composite index fell 5.04, or 0.24%, to 2,116.42.
Bonds were unchanged, with the yield on the 10-year Treasury note rising at 4.29%. The US dollar was mixed against other major currencies in European trading. Gold prices were lower.
Crude oil futures sagged. A barrel of light crude was quoted at US$65.07 (€54.19), down 75 cents, in trading on the New York Mercantile Exchange.
The prevailing feeling on Wall Street now is that some of the issues Katrina raised will linger.
“There’s a lot of issues and questions in front of the market, but I don’t think there’s going to be an easy resolution to any of them, or a quick resolution,” said Stephen Massocca, president of Pacific Growth Equities. “I think a lot of people are frozen until they get a better idea of what it all means.”
The consumer confidence drop was the largest fall from month to month in 15 years.
In other economic news, new home sales also fell in August, dropping 9.9%, according to the Commerce Department. While sales of existing homes increased in August, new home sales are thought to be a better indicator of whether increasing interest rates are changing home buyers’ behavior.
Companies began to give damage assessments from Hurricane Rita. While the damage was generally lighter than expected, stocks in oil and gas companies and others with a large Gulf Coast presence dipped.
Exxon Mobil Corp. rose two cents to 64.62 after it said it has not yet found serious damage from the hurricane. Tyson Foods Inc. fell 16 cents to 17.36 after the world’s largest producer of processed chicken said two of its meat processing plants in Houston suffered “virtually no damage” and predicted they will resume operations early this week.
Oil and gas distributor Chevron Corp. fell 6 cents to 64.18 after the company reopened a refined products terminal and began moving gasoline to service stations around Houston. But Chevron said Rita ripped one of its sea platforms from its mooring, severely damaging it.
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nsurer WellPoint Inc. fell 8 cents to 75.01 after it said it would buy WellChoice Inc., the largest health insurer in New York State, as well as parent company Empire Blue Cross Blue Shield for about US$6.5bn (€5.41bn) cash and stock. WellChoice rose 4.91 to 75.51.
Taser International Inc. fell 96 cents to 6.35 after the company said the Securities and Exchange Commission has stepped up an inquiry begun in December about safety claims and accounting to a formal investigation of the company, which means the SEC will have subpoena power to obtain documents and testimony.
Taser said the probe has been expanded to examine the possible acquisition of material non-public information by outsiders in an effort to manipulate the company’s stock price.
Declining issues led advancers by roughly 9 to 7 on the New York Stock Exchange where volume was 1.50bn, down from 1.55bn at the same time Monday.
The Russell 2000 index of smaller companies fell 1.03, or 0.16%, to 659.17.
