Stocks push higher on Wall Street
Wall Street welcomed a surprisingly forthright statement on interest rates from Federal Reserve Chairman Alan Greenspan today, with investors sending stocks higher in acceptance of his tough stand on energy prices and inflation.
Greenspan said the Fed was prepared to abandon a gradual, measured series of rate rises in favour of larger increases should higher oil prices trigger a more general rise in inflation.
While the prospect of larger and faster rate increases unnerved Wall Street in the past – and did so again in the early part of Tuesday’s session – many investors were cheered by Greenspan’s uncharacteristically straightforward statement, and noted that rate hikes in response to a strong economy fit past patterns of bull markets.
“I think because this statement was so crystal clear and unambiguous, we aren’t seeing the major selling that we saw in the past,” said Hugh Johnson, chief investment officer at First Albany Corp.
“He really hit this on the head, and there’s no need to parse or interpret this. That makes it a lot easier for the markets to digest and account for.”
According to preliminary calculations, the Dow Jones industrial average gained 41.44, or 0.4%, to 10,432.52.
Broader stock indicators edged higher after remaining low for most of the session. The Standard & Poor’s 500 index rose 1.70, or 0.2%, to 1,142.12, and the Nasdaq composite index was up 2.91, or 0.1%, at 2,023.53.
Speaking in London, Greenspan may have signalled that the Fed might raise rates by a half percentage point at the end of the month, instead of the quarter-point raise Wall Street had been expecting.
Although such a warning would have sent stocks skidding a month ago, Wall Street would now welcome a curb on inflation, given that oil prices are still near record-high levels.
Analysts noted that even with a series of rate rises through the rest of the year, interest rates would still be low compared with past bull markets.
However, trading volume has been uncharacteristically light since mid-May, which historically has not boded well for bull markets.
Oracle Corp. gained 17 cents to US$11.59 as its anti-trust trial over its potential acquisition of PeopleSoft Inc. got under way.
The database software maker said the deal would make the market for database software more competitive, not less. PeopleSoft was up 57 cents at US$19.03.
Microsoft Corp continued its own anti-trust battles, filing an appeal of a European Union decision that would require the software giant to change its business practices. Microsoft climbed 17 cents to US$26.60.
Tribune Co. dropped 1.76dollars to 46.92dollars as it announced it will cut more than 200 jobs at its newspapers due to falling advertising revenue. It also lowered its revenue forecasts for the year.
Texas Instruments Inc reaffirmed its sales and revenue forecasts after the session Monday, remaining in line with analysts’ expectations. Texas Instruments fell 19 cents to US$26.04.
Declining issues outnumbered advancers by about 5 to 4 on the New York Stock Exchange, where volume was light.
The Russell 2000 index of smaller companies was down 0.99, or 0.2%, at 577.91.
