There was a lot of talk Wednesday but not a lot of action, at least, not among major averages. For the second-consecutive session, stock proxies traded in a relatively tight range, ending close to break-even.

Topics of conversation included Federal Reserve Chairman Alan Greenspan's testimony, congressional agreement on a $383 billion tax package, ongoing weakness in Microsoft ( MSFT), a favorable jury ruling for tobacco makers, a three-month high for gold and concerns about more terrorist attacks. Motivations behind recent statements by George Soros (about the dollar) and Warren Buffett (about taxes) also generated considerable chatter among the investing class.

Whipsawed throughout the session by those (and other) forces, the Dow Jones Industrial Average traded in a 90-point range before closing up 0.3% to 8516.43. Following similar patterns, the S&P 500 rose 0.4% to 923.42 while the Nasdaq Composite slid 0.1% to 1489.90.

The Dow and S&P got a big boost from Altria ( MO), which rose 9.7%, and other tobacco makers after a Florida judge overturned a prior $145 billion jury verdict vs. the industry.

They Might Be Giants, Part 1

Early on, market participants were focused mainly on Greenspan's testimony before the Joint Economic Committee of Congress.

In a nutshell, Greenspan did not deviate from recent comments: Deflation is "not imminent," he said, but the Fed is prepared to use any means necessary to prevent its onset, including "mov ing along the yield curve," i.e. buying longer-dated Treasuries.

Meanwhile, Greenspan declared (yet again) that "a pickup in economic activity is not unreasonable, though the timing and extent of that improvement continue to be uncertain."

The testimony "does not break new ground," according to Mickey Levy, chief economist at Banc of America Securities. "Greenspan provided a guarded assessment of current mixed economicconditions, identified some positive and negative crosscurrents, andrepeated the Fed's concerns about further substantial disinflation, notingthe Fed perceives it as a 'minor' possibility."

Equity prices were fairly subdued during and immediately after Greenspan's testimony. Treasury prices reacted more dramatically, however.

Treasuries fell before Greenspan's appearance, then rallied afterward. Greenspan's comment that "inflation is now sufficiently low that it no longer appears to be much of a factor in the economic calculations of households and businesses" was interpreted as confirmation the Fed isn't going to tighten in the foreseeable future.

But midday strength in Treasuries faded, amid a sense their historic run has become vastly overextended. The price of the benchmark 10-year note ended down 10/32 to 101 31/32, its yield rising to 3.39%.

As equity traders moved on from Greenspan, the topic du jour turned to Microsoft, which fell 2.4% to $24.04, despite an upgrade from Fulcrum, a boutique research firm catering to the hedge fund industry.

In the past 12 months, Microsoft was off 12% heading into Wednesday's session, vs. a 14% decline for the Comp and a 17% slide by the S&P 500.

But more recently, the software giant has glaringly underperformed. Since the October lows, the Comp is up 28% vs. 14% for the S&P 500 and a relatively paltry 6% rise for Microsoft. Since Jan. 1, the Comp is up 12% and the S&P by 5%, but Mister Softee has fallen 5%.

Microsoft shares have risen 8% since the mid-March lows, but lagged gains by the averages.

About 10 days ago, the S&P 500 was seemingly on the cusp of a technical breakout. At that time, some observers speculated that major averages would be unable to accomplish that move without participation and "confirmation" from Microsoft, one of the market's largest components. (Hindsight being 20-20, I should have written about it, especially because last summer I wrote about how Mister Softee had become the market's key "tell.")

In another example of it doesn't matter until it matters, such talk has intensified in recent days -- contributor John Roque columnized about it Tuesday -- reaching a fever pitch Wednesday.

Obviously the recent past has shown the market -- particularly tech proxies -- can rally sharply with the Redmond Menace lagging. But with major averages becoming technically overextended and overbought, running further without Microsoft became more daunting. (Microsoft makes up 2.1% of the price-weighted Dow, 3.1% of the S&P 500 and 10.6% of the Nasdaq 100, Roque reported.)

"It's not good, let's call a spade a spade," Brad Ruderman, managing partner of RCM Partners, said of Microsoft, which his hedge fund is long. "It's definitely a nonconfirmation of the recent rally and makes me not want to commit any more capital, particularly in high-tech stocks until Microsoft at least stops going down."

Catalysts for Microsoft's slide Wednesday included separate rumors of a huge block of shares for sale and a price cut for Office 2003, according to

Whatever the reason, "it will be very interesting to see if Microsoft can repair itself," Ruderman said. "Heading into a long holiday weekend, I wonder how many people are going to step up to the plate."

Microsoft did close off its session low of $23.89 on higher-than-average volume, so, apparently, there were some "steppers" Wednesday. But they're going to have to pick up the pace (and their heels) if Microsoft, and perhaps the broader market, are going to dance again.

They Might Be Giants, Part 2

The dollar rose to 117.26 yen late Wednesday from 116.71 the prior day while the euro dipped to $1.1675 from $1.1707. The greenback's strength was attributed to Greenspan leaving the door open to future rate cuts -- even if he dampened expectations for an ease on June 24-25 -- and further action by the Bank of Japan to weaken the yen.

In separate but-related news, currency traders also mused about George Soros, who revealed a short position on the dollar Tuesday on CNBC.

Soros "has surely carried very large short dollar positions for some time -- at least since last summer when he deemed the dollar to be 30% overvalued," deduced Jes Black, currency analyst at MG Financial Group. These positions "need to be unwound without substantially moving the market."

Rather than looking to press a negative bet, Soros' public declaration is probably a prelude to the famed financier "getting ready to cover some of his shorts," Black continued. "Speculation is a battle of wits, and Mr. Soros has proven his worth many times over."

Black's cynical, but logical, take on Soros recalled feedback to recent comments by Buffett regarding tax fairness. As reported here, Wall Street's view is Buffett is mainly "talking his book" or, at least, should voluntarily pay more taxes if rich folks such as he are getting a break.

Such sentiment (and suggestions) resurfaced this week after Buffett penned an op-ed piece in The Washington Post in which he sought to demonstrate how dividend tax reform would far more benefit he (and others of his ilk) vs. a receptionist at Berkshire Hathaway.

The Oracle of Omaha described the kind of sunset provisions agreed upon in Congress on Wednesday as " Enron-style accounting," before concluding: Making dividends tax-free "promotes class welfare. For my class." (Emphasis his.)

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task

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