Stocks staggered to a mixed finish yesterday after Federal Reserve Chairman Alan Greenspan told a congressional committee the economy is...
NEW YORK — Stocks staggered to a mixed finish yesterday after Federal Reserve Chairman Alan Greenspan told a congressional committee the economy is strong, a sign that the central bank is likely to continue raising interest rates.
The Dow Jones industrial average shed 2.44 to close at 10,834.88.
Microsoft, one of the 30 Dow stocks, fell 14 cents to close at $25.79 a share. Boeing, also a Dow stock, retreated 51 cents to $53.92.
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The broader gauges were narrowly mixed. The Standard & Poor’s 500 rose 0.22 to 1,210.34. The Nasdaq composite index was down 1.78 at 2,087.43.
Greenspan also told the Senate Banking Committee that while inflation is not an immediate threat, it remains something policy-makers must guard against.
His remarks seemed to support the views of many economists that the Fed will probably stick with its policy of raising interest rates at a gradual pace. The dollar firmed against other currencies, gold declined and Treasuries weakened, but stocks stalled as investors tried to discern how far the rate tightening would go.
“The problem for stocks is there’s no end in sight,” said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. “Greenspan still thinks rates are too low, and he has no intention to stop raising rates. And history has shown the Fed doesn’t just stop raising rates on its own. Something happens. We don’t know what it will be, but I know that’s the thing that keeps me up at night.”
While Greenspan’s remarks pressured the rate-sensitive financial sector, housing stocks soared, with the Dow Jones Home Construction Index climbing 2.12 percent. After several years of low mortgage rates, the real estate industry is threatening to become the next bubble, underscoring Greenspan’s desire for higher long-term rates. Further highlighting the issue, the government’s latest report on housing construction showed a 4.7 percent rise in January, the highest level of activity in 21 years. The increase surprised economists, who had forecast a 3.7 percent decline.
In other economic news, the Fed reported that output at the nation’s factories, mines and utilities was unchanged in January, a disappointment to analysts who had expected a healthy 0.3 percent increase.
Oil prices were volatile, climbing $1.07 to settle at $48.33 as traders sifted through the government’s weekly report on fuel inventories. Tensions in the Middle East and an OPEC forecast for rising demand contributed to the price rise. U.S. stores of crude and gasoline grew more than analysts had anticipated, but there was a higher-than-expected draw on distillate fuels, which include heating oil.