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 economic conditions, identified some positive and negative crosscurrents, and repeated the Fed's concerns about further substantial disinflation, noting the Fed perceives it as a 'minor' possibility."