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Stocks Bounce From Lows After Dropping on Greenspan Comments

The market's focus is on Treasuries.



Alan Greenspan

delivered a jolt that sent stocks reeling this morning, but toward noontime they recovered some of their losses.


Nasdaq Composite Index

, home of many of the stocks Greenspan was talking about when he called valuations hard to justify, lately was up 2 to 2537 after trading as low as 2506.59.


(MSFT) - Get Microsoft Corporation Report

was leading the big-cap techs, up 1 5/16 to 80 7/16 on its deal to invest $5 billion in


(T) - Get AT&T Inc. Report


Smallish-cap issues were solid as well, with the

Russell 2000

up 1 to 436. (The

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S&P SmallCap 600

, a truer small-cap measure, was up fracationally to 174.) And modest strength in Internet stocks had Internet Sector

index up 3 to 640.

Continuing in the loss column were the

Dow Jones Industrial Average

, off 59 to 10,896, and the

S&P 500

, down 8 to 1339.

The bond market remained under heavy pressure but was off its worst levels. The benchmark 30-year Treasury was down 21/32 to 92 28/32, its yield swelling to 5.76%.

Barry Berman, head trader at

Robert W. Baird

in Milwaukee, said the weak bond is unsurprisingly the stock market's primary focus right now.

"The stock market followed the bond futures lower, they stabilized, turned around a couple of points and stocks followed," he said. "The focus for stocks right now, it's a question of which one you want to put first: It's inflation and interest rates. The bond market is worried about inflation and the Fed and they run up and down on expectations. The stock market is worried about interest rates."

Market internals were middling.

New York Stock Exchange

decliners were narrowly edging advancers 1,391 to 1,321 on 397 million shares. On the

Nasdaq Stock Market

, 1,792 advancers were leading 1,695 decliners on 400 million shares. New 52-week highs were outpacing new lows 58 to 9 on the Big Board and 50 to 20 on the Nasdaq.

Most active on the NYSE was AT&T, up 4 11/16 to 61 5/8 on 25 million shares. Microsoft was the Nasdaq's most active issue, with 20 million shares changing hands.

Tech Focus

Among major tech indices, the

Morgan Stanley High-Tech 35

, the

Philadelphia Stock Exchange Semiconductor Index

and the

Philadelphia Stock Exchange Computer Box Maker Index

were all down fractionally.


(RMBS) - Get Rambus Inc. Report

was a somewhat mysterious standout among chip equipment makers, up 5 1/16, or 9%, to 62 13/16. The stock failed to participate in yesterday's rally in the sector and might be making up for a little lost ground.

11:04 a.m.: Stocks Drop on Greenspan Comments

Unlike other deities and near deities,

Federal Reserve


Alan Greenspan

needs no mountaintop to speak from on high. At the

Federal Reserve Bank of Chicago


Chicago!? Why, it couldn't be! Dirty Turtle.

) today, Greenspan spoke the words. And it wasn't what Wall Street bulls wanted to hear.

The beauty of Greenspeak is it can be parsed in a variety of ways, and there's something for everyone in today's speech. But inflation hawks were no doubt excited by the chairman's comment: "There are imbalances in our expansion that, unless redressed, will bring this long run of strong growth and low inflation to a close."

Potential rekindlers of inflation's flame mentioned by Mr. Greenspan include the recent sharp rise in the price of oil, the "tentative signs" of recovery in world economies and tight labor markets.

Bond prices, both in the cash and futures markets, improved a bit as the speech unfolded but quickly and sharply reversed course. Equity gauges followed directly, although have since bounced off their lows.

The price of the 30-year Treasury bond was lately down 28/32 to 92 20/32, its yield rising to 5.77%.


Dow Jones Industrial Average

, which approached breakeven during the speech after a weak opening, was lately down 46 to 10,909. The

S&P 500

was down 9 to 1338. The

Russell 2000

was down fractionally at 434.


Nasdaq Composite Index

was down 11 to 2523 after briefly trading in positive territory this morning after Greenspan made his almost de facto comments about the productivity gains generated by technology. Internet Sector

index was off 3 to 634.

"I don't think what he said was wildly negative. But he's well aware the debt markets have been on the ropes, and he hardly alleviated any of those fears," said one bond trader of Greenspan's speech. "The market has been fretting he'd say something that was negative. He didn't say anything horrendously negative. But when he says things like, 'Of most concern is how long this remarkable period of prosperity can be extended,' you have to start to say to yourself, 'Is he going to an asymmetric bias in May to set up a tightening in June?'"

The trader, who requested anonymity, observed the Europeans have taken steps to improve the euro in recent weeks. "My suspicion is at the last conclave Alan Greenspan told these guys, 'If you don't want the euro to go straight into the

toilet, you'd better recognize we can't keep our interest rates where they are.'"

Still, the trader does not believe the Fed will raise rates this year. "Inflation is under control, the economy is growing, so let sleeping dogs lie," he said.

However, that does not mean he's betting against the rising negativity in the bond market.

If the jobs data tomorrow are weaker than expected, the unemployment rate rises and there's no wage pressure, bonds will rally a "point, point and a half, no problem," he said. "But if it's strong, we'll get hammered. There are sellers in the marketplace.


flushed out the shorts.


was horrendously strong. Greenspan is not doing anything to make people feel they want to be buying dips."


Aaron L. Task

10:16 a.m.: Stocks Mixed in Early Volatile Trading

Volatile stocks were bouncing back after a plunge at the open as



Alan Greenspan

was delivering his latest Rorschach analysis of the U.S. economy at the

Chicago Fed



Dow Jones Industrial Average

was south 15 to 10,941. The

S&P 500

was off 2 to 1345. The

Nasdaq Composite Index

was up 6 to 2541. The

Russell 2000

was up 1 to 435. Internet Sector

index was up 5 to 643. The 30-year Treasury bond had slipped 18/32 to 92 30/32, yielding 5.75%.

Most Up at Open -- NYSE


(T) - Get AT&T Inc. Report

, up 4 1/16 to 61, fresh off its successful bid for



and news of a $5 billion investment by


(MSFT) - Get Microsoft Corporation Report


Most Up at Open -- Nasdaq

Gemstar International


, up 14 9/16 to 125.

Most Down at Open -- NYSE


(AEG) - Get AEGON N.V. Report

, down 3 11/16 to 90 1/2.

Most Down at Open -- Nasdaq

Knight Trimark


, down 2 15/16 to 146.


Thomas Lepri