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European Bankers Hold Steady, and Now Greenspan Takes the Mike

The Fed chairman will speak this morning at the Chicago Fed just before the market opens.

The secret to comedy is timing. And central bank policy as well, it seems.

At least that's what the equity market is thinking today with



Alan Greenspan

set to step up to the mike at 9:25 a.m. EDT, just five minutes before the market opens.

The speech, at a conference organized by the

Chicago Fed

, is crucial. Recently,

Federal Open Market Committee

members have expressed different opinions on what the inflation risks are these days. Greenspan has been silent.

"This is definitely one to keep an eye on," said Mike Cloherty, senior market economist at

Credit Suisse First Boston

. "There have been some rumblings that the Fed could move to a tightening bias at the May 18 meeting."

The general thought seems to be that the chairman will go easy on the market today. With the long bond threatening to drop below the range it's traded in since late February, the risks are great. If Greenspan waxes inflationary, bonds could reprice, taking stocks down with them.

"I wouldn't think that he'll make any kind of bombshell announcement," said Jim Benning, a trader at

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. "Especially at that hour -- you'd expect him to be cautious."

Remember, Mr. Greenspan: If it bends, it's funny. If it breaks...

Treasuries and futures took a turn for the worse ahead of the speech. At 9 a.m. EDT, the 30-year Treasury was off 19/32 to 92 29/32. The

S&P 500

futures were down 7.3, more than 8 below fair value and indicating a drop at the open. More than those, the thing that everybody's been watching in is the June contract on the 30-year. It was down 18/32 to 119 10/32. The low for the year is 119 9/32. If it breaks through that, there will be trouble.

A lot of this weakness is likely people taking in a little just-in-case insurance ahead of the speech, though. If in fact Greenspan doesn't say anything, the outlook should improve. (The speech will be available on the Fed's

Web site.)

While Tokyo traders were on vacation this week, a lot of good things happened. In balance, stocks around the world put in a pretty good performance. Japanese government officials began to float the idea that more stimulus measures would be needed to fight off the deflationary effects of restructuring.

Bank of Tokyo-Mitsubishi


said it was mulling a U.S. public offering to help pay down debt, and


saw its investment in

Goldman Sachs

(GS) - Get Goldman Sachs Group Inc. (The) Report

pay off.

The surfeit of good tidings helped lift the


599.08, or 3.6%, to 17,300.61. The index is now at its highest level since the October 1997 global-market free fall.

Hong Kong stocks saw slight declines, as investors tried to judge what Wall Street's interest-rate jitters mean for it. Pegged to the U.S. dollar, Hong Kong is sort of stuck in the middle of the debate. It's great for Hong Kong if Asia recovers, but that might make U.S. rates move higher. Bad. The

Hang Seng

slipped 15.97 to 13,570.24.

No one expected the

European Central Bank

to cut rates at its meeting today, so its announcement that it's holding steady had little effect on European bourses. Stocks came off earlier levels as the U.S. outlook got murky. In Frankfurt, the


was up 5.3 to 5312.52. In Paris, the


was down 1.3 to 4366.87.


Bank of England

didn't cut rates at its meeting today, either. Again, nobody expected it would. The


was up 33.4 to 6435.1.

Thursday's Wake-Up Watchlist

By John J. Edwards III
Markets Editor

  • AT&T (T) - Get AT&T Inc. Report confirmed that Microsoft (MSFT) - Get Microsoft Corporation Report will invest $5 billion in Telephone in exchange for assurances that the Windows operating system will be used in AT&T's digital set-top boxes. Mister Softee will make the investment by buying AT&T preferred securities and warrants. The T-MSFT link is another twist in AT&T's successful battle against Comcast (CMCSK) for the fair hand of MediaOne (UMG) .
  • Equitable (EQ) - Get Equillium Inc. Report reported first-quarter earnings of $1 a share, 5 cents ahead of the 10-analyst First Call estimate and up from the year-ago 92 cents.
  • General Motors (GM) - Get General Motors Company Report acknowledged that its Cadillac division sold 4,773 fewer cars in December than it had reported, meaning Ford's (F) - Get Ford Motor Company ReportLincoln division was indeed the top seller among U.S. luxury marques in 1998. Lincoln topped Cadillac for the first time since 1939.
  • Heinz (HNZ) said it expects the first phase of its previously announced restructuring to result in savings of $50 million in fiscal 2000, $100 million in fiscal 2001 and $150 million in fiscal 2002.
  • Lockheed Martin (LMT) - Get Lockheed Martin Corporation Report agreed to join TRW (TRW) and Telecom Italia (TI) to create a $3.6 billion global, satellite-based broadband service provider.
  • National Semiconductor (NSM) late yesterday announced it will leave the PC microprocessor business, bowing to the pressure of competing head-to-head against Intel (INTC) - Get Intel Corporation Report. National Semi will focus instead on its core analog chip business and on chips for smart appliances. The news brought National a slew of upgrades to buy ratings: BancBoston Robertson Stephens promoted it from long-term attractive, Donaldson Lufkin & Jenrette boosted it from market perform and Gruntal lifted it from hold.
  • Qwest Communications (QWST) shareholders approved a 2-for-1 stock split.
  • Restoration Hardware (RSTO) warned that it expects to report a first-quarter loss of 14 cents to 18 cents a share. The nine-analyst estimate called for a loss of 6 cents vs. the year-earlier loss of 5 cents. The company said it is unable to immediately meet all of its customer demand for the first quarter and expects second-quarter gross margins to suffer as a result. Restoration said it doesn't expect to make up the shortfall in the remainder of the year.
  • Seagram (VO) - Get Vanguard Mid-Cap ETF Report reported a third-quarter loss of 50 cents a share, 4 cents better than the eight-analyst forecast.
  • Waste Management (WMI) reported first-quarter earnings of 61 cents a share, a penny short of the 13-analyst outlook. Among companies reporting their April same-store sales:
  • AnnTaylor (ANN) said sales rose 10.3%.
  • Bon-Ton Stores (BONT) said sales fell 2.7%.
  • Bradlees (BRAD) said sales rose 7.8%.
  • Braun's Fashions (BFCI) said sales rose 11%.
  • Children's Place (PLCE) - Get Children's Place Inc. (The) Report said sales rose 32%.
  • Claire's Stores (CLE) said sales rose 5%.
  • Kmart (KM) said sales rose 5.7%.
  • Men's Wearhouse (SUIT) said sales rose 2%.
  • Michaels Stores (MIKE) said sales rose 2%.
  • Neiman-Marcus (NMG) said sales rose 13.6%.
  • Pacific Sunwear (PSUN) said sales rose 5.9%.
  • Ross Stores (ROST) - Get Ross Stores Inc. Report said sales rose 3%. Ross also said it expects to report first-quarter earnings of 71 cents to 73 cents a share, topping the 11-analyst estimate of 68 cents and the year-ago 57 cents.
  • United Retail Group (URGI) said sales rose 3%.
  • Value City (VCD) said sales fell 4.2%.
  • West Marine (WMAR) said sales rose 2.2%.