A tech-enthused market looked past status-quo testimony by


Chairman Alan Greenspan on Thursday and moved up thanks to


(GOOG) - Get Report



(INTC) - Get Report

and oil.

Greenspan's much-anticipated congressional appearance failed to shock anybody, and that was enough for investors to resume buying tech shares. Especially as

National Semiconductor


posted better-than-expected earnings, boding well ahead of Intel's midquarter update, which also turned out well.


Dow Jones Industrial Average

finished up 26.16 points, or 0.25%, at 10,503.02, and

the S&P 500 index

gained 6.26 points, or 0.52%, to 1200.93. Besides techs, the indices also were boosted by oil stocks as the price of crude oil prices rallied back above $54 per barrel.

Exxon Mobil

(XOM) - Get Report

advanced 3% and


(CVX) - Get Report

rose 2%.

But the action was mostly in the

Nasdaq Composite

which advanced 16.73 points, or 0.81%, to 2076.91, thanks to the good news in the semiconductor sector.

Tech shares, which had lost steam over the past few sessions, also came back to the fore, thanks to yet another bullish call on Google. Talk that the market's tech darling may be in a bubble of its own hit the shares Wednesday. But that was just because the stock was near $300. This time, Smith Barney raised its price target on Google to $360, and the "bubble" concerns were forgotten. The stock gained 2.2% to $285.73.

In prepared remarks to Congress, Greenspan reiterated that while underlying inflation is contained, the economy remains on a "a reasonably firm footing" and the Fed believes it can continue raising rates at a "measured" pace.

Some in the market hoped the Fed Chairman would tip his hat to those believing the central bank would stop hiking rates after its next rate-setting meeting in June. No such luck. Greenspan reiterated that this spring's economic weakness was transitory and shouldn't spawn a major slowdown.

But neither did Greenspan try to diffuse the impact of surprising comments last week by Dallas Fed president Richard Fisher, who said the Fed was in the eighth inning of its rate-hike campaign. That was enough for many in the market to keep those hopes alive.

"The market got a little hyped about the Fisher comments. But Greenspan neither denied nor confirmed what he said," says John Hugues, managing director at Ephiphany Equity Research. "We still think the end game

for rate hikes is near."

End of Rate-Hike Expectations Revised

Greenspan's testimony didn't spook the equities market, but fresh expectations that rates will continue rising boosted the dollar and hit bonds.

The benchmark 10-year bond fell 5/32 while its yield rose to 3.95%, after briefly touching the 4% mark. As Greenspan's testimony unfolded, the market began to reprice higher odds of future rates hikes beyond the Fed's June meeting, according to Miller Tabak. Fed funds futures are now pricing 92% odds of a 25-basis-point hike at the Aug. 9 meeting, up from 80% before the testimony. The market is also pricing in 34% odds of another rate hike in September, up from 18% late yesterday. Overall, the market is now pricing in an 80% chance that fed funds will stand at 3.75% rate by year-end.

While giving no indication that the Fed will pause, Greenspan said he remains unable to choose one explanation over another as to why bond yields remain low globally.

Meanwhile, as long as the long bond remains near 4%, the stock market can carry its tech-led rally "a little bit further," says Epiphany's Hughes. Even if tech names get sold after rallying since late April, the Nasdaq can find support because it also lists a large number of the more defensive healthcare stocks, he said.

Likewise, the dollar rose against the euro. With dollar bulls testing resistance levels against the battered euro, Greenspan's testimony confirmed the view that U.S. rates remain on an upward path while global rates remain low.

MG Financial currency strategist Ashraf Laidi, who was expecting Greenspan to be more dovish, says the greenback should remain supported by U.S. yields even at around 4%.

Greenspan also reiterated that the U.S. Treasury market is large enough to not be impacted "too much" if foreign central banks continue diversifying their currency reserves in nondollar denominated currencies.

The dollar, however, could be hit Friday if the U.S. trade deficit has widened more than expected in April. Currently, economists expect the deficit to have swelled to $58 billion from $55 billion in March. A reading of $60 billion could hit the greenback, Laidi says.

But the real test for the greenback and other markets will come next week. On Tuesday and Wednesday, the market will have to digest the update for producer and consumer prices as well as a large number of significant economic data.

Answering questions on inflation, Greenspan said that "at the moment there is little evidence of inflationary pressures on the production side, but underlying labor costs are rising and there is evidence that passing through those costs is easier."

Meanwhile, the Fed chief's remarks on housing weren't new, but they made up a large portion of his prepared remarks. "We're spending a considerable amount of time trying to figure out the impact" of the housing boom, Greenspan told senators.

But while again acknowledging "froth" in the market, he downplayed the potential impact of lower housing prices and of slowing consumption on the broader economy, saying he expects business spending to pick up the slack.

That lack of concern apparently pleased investors long housing stocks. The Philadelphia Housing Sector Index rose 0.67%. Homebuilder


(HOV) - Get Report

added 1.95%, and

Toll Brothers

(TOL) - Get Report

gained 1.74% after announcing a 2-for-1 stock split.

To view Aaron Task's video take on today's market, click here


In keeping with TSC's editorial policy, Godt doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He appreciates your feedback;

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