SAN FRANCISCO -- "Productivity counts" was the message investors took from Alan Greenspan's second round of Humphrey-Hawkins testimony today. Thus, stocks most closely associated with productivity -- technology, that is -- returned to their role as Godzilla while blue-chips acted like Godzuki (yup, Godzilla's son), trailing along several paces behind.
"The issue of stock prices and equity values generally going up as a consequence of accelerating productivity is a perfectly understandable and appropriate thing to happen," Greenspan said during Q&A before the
Senate Banking Committee
chairman also denied using monetary policy to directly target stock market valuations. (Prior to the Q&A, Greenspan reread the
testimony given before the
House Banking Committee
on Feb. 17.)
In reaction, the
Nasdaq Composite Index
tore through its previous records for closing highs and best-ever point gains like the legendary lizard through celluloid Tokyo. The breathing-tech-like-fire index rose 168.16, or 3.8%, to an all-time high 4550.28 behind strength in bellwethers such as
rose 5.1% to a record 4170.09.
Qualcomm jumped 12.2% and Cisco leapt 11.8% on word that
Standard & Poor's
will increase each of their weightings in the
after the close of trading today.
Chip stocks also continued to be in favor. The
Philadelphia Stock Exchange Semiconductor Index
rose 1.8% to a record 1007.49 thanks to gains from
, which was upgraded by
Warburg Dillon Read
In addition to Greenspeak, tech proxies got a lift from merger and related activity.
fell 8.6% after
agreeing to buy
, which dipped 4.6%.
rose 9.4% after receiving a
buyout offer from
, which fell 5.9%.
soared 18.3% after a bullish meeting with analysts and announcement of separate alliances with Sun Microsystems and
, which rose 17.7%.
rose 16.4% after
each made a $35 million equity investments in the company. Nortel gained 5.2% while Safeco shed 6.6%.
TheStreet.com Internet Sector
index rose 82.58, or 7.6%, to 1167.48, led by
. AOL rose 14.9% after
issued bullish comments about the firm's planned takeover of
, which rose 10.8%.
Merrill also gave a boost to
, which leapt 14.7% after the brokerage initiated coverage with a buy rating.
"AOL got things going then somebody -- everybody -- decided to allocate funds," Scott Bleier, chief investment strategist at
said. "My guess is some tech-oriented mutual fund is deploying funds, chasing performance. People are buying stocks and in this market price is no object."
The market cap gains in Internet and biotech stocks, particularly, are "completely out of touch with what represents reality in terms of future cash flow and earnings," he said. "But it doesn't matter because all these stocks are pure momentum. And we -- as money managers -- have an obligation to participate. If we don't and we miss all these gains, we're not going to have clients for very long. That's why the merry game goes on."
TheStreet.com New Tech 30
rose 42.98, or 5.9%, to 766.50. Unveiled Jan. 5, the TSC New Tech 30 is a market-cap-weighted index focusing on tracking the so-called hot money part of the market. A list of index components is available at
At the other end of the valuation spectrum, the
Dow Jones Industrial Average
fell 79.11, or 0.8%, to 10,225.73 after trading as low as 10,164.92 and as high as 10,338.35.
Procter & Gamble
Johnson & Johnson
provided the greatest drags on the Dow.
The S&P 500 rose 8.52, or 0.6%, to 1360.69. Major industry groups such as energy, chemicals, retailers, and transports returned to their losing ways, keeping the S&P 500 from advancing more earnestly.
climbed 8.96, or 1.7%, to 549.91 as small-cap tech and bio-tech stocks revived after a brief slumber. The
American Stock Exchange Biotech Index
In addition to momentum and Greenspan, market watchers said the "gloom and doom" evident late last week and early
yesterday was simply overdone.
"Eventually, interest rates reach a level that it starts to encourage some investors back into the stock market or it becomes clear the world is not going to come to an end as we thought on Friday," said Hugh Johnson, chief investment officer at
. "The most important thing is stocks have declined and have reached levels where they are arguably undervalued."
The price of the 30-year Treasury bond fell 17/32 to 101 23/32, its yield rising to 6.12% today as fixed-income traders were displeased at what they perceived to be back-pedaling by Greenspan from last week's
hawkish message. But yesterday, the long bond hit its lowest yield level since mid-November, Johnson noted.
On Monday, Johnson told clients, "despite the fact the market may scare you, don't reduce exposure further. In the equity portion of your portfolio remain overweight in tech and respond to the shift in small- and mid-caps. That's where you'll get your best performance right now."
The again, negative market internals continued to provide some traders reason for concern.
New York Stock Exchange
trading, 993.7 million shares were exchanged while declining stocks bested advancers 1,758 to 1,235. In
Nasdaq Stock Market
action 1.9 billion shares traded -- the sixth-busiest session ever -- while gainers led 2,199 to 1,987. New 52-week lows whipped new highs 211 to 44 on the Big Board while new highs led 247 to 120 in over-the-counter trading.
Among other indices, the
Dow Jones Transportation Average
fell 38.86, or 1.6%, to 2420.28; the
Dow Jones Utility Average
slid 2.38, or 0.8%, to 293.52; and the
American Stock Exchange Composite Index
rose 0.53, or 0.1%, to 934.99.
For coverage of today's top stocks in the news, see the Company Report, published separately