Greenspan gave investors the idea that the Fed may hold off from raising interest rat
Turbo : Greenspan gave investors the idea that the Fed may hold off from raising interest rat
Non-threatening remarks from Fed chief encourage bargain-hunting investors
July 20, 2000: 10:32 a.m. ET
NEW YORK (CNNfn) - U.S. stocks soared for the first time in three days early Thursday as investors, encouraged by remarks from Federal Reserve Board Chairman Alan Greenspan, bet that the recent downturn was overdone.
In prepared remarks released before testimony to the Senate Banking Committee, Greenspan gave investors the idea that the Fed may hold off from raising interest rates next month.
"He gave more of the same," said Barry Hyman, chief market analyst at Ehrenkrantz King Nussbaum, who read a copy of Greenspan's remarks. "A little good news and a little warning. There's nothing to make us fear that August is set in stone."
Microsoft and Intel, hard hit this week after reporting earnings, drew buyers. A surge in JDS Uniphase, which will be added to the S&P 500, also lifted the Nasdaq composite index.
And IBM led the Dow Jones industrial average higher after the nation's largest technology company in terms of revenue posted better-than expected profit.
"IBM is being a good influence on the markets, "Hyman said.
Around 10:25 a.m. ET, the Nasdaq gained 109.60 to 4,165.23. That reversed most of the 121.55-point slide Wednesday, its second straight session of losses, and put the index above the 4,069 mark at which it ended 1999.
The Dow added 138.24 to 10.833.36, countering a 43.84-point loss from the previous session.
The S&P 500 gained 15.00 to 1,496.96.
More stocks rose than fell. Advancing issues on the New York Stock Exchange outpaced declining ones 1,242 to 751, as more than 155 million shares changed hands. Nasdaq winners beat losers 1,748 to 1,087, on trading volume of more than 1236 million shares.
Ob das der Startschuß für die Rally ist?
ruebe : Das hört sich jedenfalls gut an - aber das tollste an der Meldung ist
Kicky : Greenspan rät zur Vorsicht,es sei zu früh anzunehmen,dass die Economy sich verlangsam
Fed Chief suggests it's too soon to conclude that economy is slowing
July 20, 2000: 10:47 a.m. ET
NEW YORK (CNNfn) - The U.S. economy is beginning to exhibit signs of slowing, but it is too soon to conclude that the slowdown is enough to keep inflation from accelerating, Federal Reserve Chairman Alan Greenspan said Thursday.
Delivering his twice-annual monetary policy report to Congress, Greenspan said softening U.S. consumer spending may help bring demand back into line with the economy's potential to produce. But he also warned that tight labor markets and rising energy prices still might stoke inflation.
"It is much too soon to conclude that these concerns are behind us," Greenspan said in his prepared remarks to the Senate Banking Committee. "We cannot yet be sure that the slower expansion of domestic final demand, at a pace more in line with potential supply, will persist."
Investors interpreted Greenspan's remarks to mean that the Fed will keep a vigilant eye on the economy, but will likely hold off on raising rates again next month, choosing instead to wait to see how its six rate increases implemented during the past 12 months further affect growth. The Fed last raised rates by a half-point on May 16 and left rates unchanged in June.
Walking a tightrope
Greenspan walked his now familiar tightrope of depicting the world's largest economy as both exceptionally strong and yet exceptionally productive - productive enough to keep inflation in check, despite above-potential growth.
"Demand may be moving closer into line with the rate of advance in the economy's potential, given our continued impressive productivity growth," Greenspan said. "Should this favorable outcome prevail, the immediate threat to our prosperity from growing imbalances in our economy would abate."
As for consumer spending, which accounts for roughly two thirds of total economic output, Greenspan suggested that Americans may have spent themselves - literally - suggesting that their seemingly insatiable appetite for new homes, cars, computers, electronics and other goods may now be sated.
"Even without the rise in interest rates, an eventual leveling out or some tapering off of purchases of durable goods and construction of single-family housing would be expected," he said. The notion that consumers may have hit a limit in their spending is a "credible addition" to other explanations for the recent drop-off in consumer purchases.
At the same time, Greenspan warned that higher energy prices are pushing up inflation, and it's too soon to know whether the slowdown in consumer spending will last. "Certainly, we have seen slowdowns in spending during this near-decade-long expansion that have proven temporary," he said.
Kicky : und der Federal Reserve Report schliesst steigende Inflation nicht aus
A Federal Reserve report which accompanied Mr. Greenspan's testimony said top policy makers think that inflation might accelerate this year. Accordingly, the report said the FOMC "will need to be alert to the possibility that financial conditions may need to be adjusted further."
The report stated that inflation may "pose a considerable risk to the continuation" of the record U.S. economic expansion.
The FOMC report was increasingly explicit about the monetary policy expectations of the central bank.
"The committee will need to be alert to the possibility that financial conditions may need to be adjusted further to balance aggregate demand and potential supply and to keep inflation low," the FOMC said.
On the brighter side, the FOMC's new "central tendency" data project a tempering of growth later this year and into 2001 if crude oil prices "retrace this year's run-up by next year" as indicated in futures markets.
In its mid-year update to Congress, the FOMC sees real gross domestic product growing 4% to 4.50% this year and 3.25% to 3.75% in 2001. In February, the Fed projected 3.5% to 3.75% real GDP growth.
The central tendency projection is for inflation as measured by the PCE (personal consumption expenditures) chain-type price index to rise 2.50% to 2.75% this year and 2% to 2.50% next year. Previously, the Fed had projected this index at 1.75%-2% in 2000. The Fed turned to the PCE index this year and dropped the Consumer Price Index.
The Fed's new central tendency projection is for the unemployment rate to be "about 4%" in the fourth quarter of this year and 4% to 4.25% in the fourth quarter of 2001. This is slightly lower than a 4%-4.25% projection made earlier for the fourth quarter of this year.
The new projection is for nominal GDP growth of 6.25% to 6.75% this year and 5.50% to 6% next year. Earlier, the projection was 5.25% to 5.5% for this year.
The central tendency projections come from members of the Federal Open Market Committee and other Federal Reserve Bank Presidents.
Meanwhile, during the question-and-answer portion of his Senate appearance, Mr. Greenspan criticized legislation that would impose economic sanctions against China for weapons proliferation, saying the measure would be more harmful for the U.S. than for China.