Forget E.F. Hutton, when Fed Chief Alan Greenspan speaks, everyone listens, and today investors listened and loved what they heard as the chief gave a strong hint that an interest rate cut was on the horizon.
Greenspan said the Fed is watching for the possibility of “excessive softening” in the U.S. economy as the economy slows to a more sustainable rate of growth, which means the central bank no longer views inflation as the main threat to the nation’s economy. This in turn could mean that he may be willing to contemplate lower interest rates, or at the very least changing the Fed’s bias from inflationary to neutral.
The market was already on an upswing prior to his comments after Republican presidential candidate George W. Bush scored two major judicial victories over Democrat Al Gore, giving hope to an end to the contested election.
The result was a rally not seen in ages. The Dow Jones industrial average soared 338.62, or 3.21 percent, to 10,898.72, while the Nasdaq Composite Index exploded, up 274.01, or 10.48 percent, to 2889.76, the single largest percentage gain in Nasdaq history. The Standard and Poor’s 500 index also took off, up 51.56, or 3.89 percent, to 1,376.53.
“We needed this so bad,” said Charles Payne, principal analyst with Wall Street Strategies, in New York. “Just the emotion lift, that the market can have this type of session, is going to go a long way.”
Payne pointed out that other members of the Fed will be speaking at various engagements tomorrow and could have delivered the same news, so by making the statement himself, Greenspan was trying to give the message some weight. “I think he wanted to pat himself on the back and say ‘we brought in a soft landing,’ and he wanted to bring in a little certainty to the market,” he said. “We’ve been yelling for a life preserver for a long time.”
Semiconductors
This oversold market was ready for a comeback, and come back it did. PMC Sierra (PMCS) led the way, soaring 26 15/16 to 127, Transmeta (TMTA) jumped 13 to 37, Analog Devices (ADI) gained 7 1/8 to 56 1/16, Broadcom (BRCM) gained 6 7/16, Intel (INTC) was up 3 1/16 to 36 and Rambus (RMBS) rose 5 7/8 to 49 5/8.
Networking
This sector also made a big recovery, with many stocks posting double-digit percent gains. Juniper (JNPR) jumped 26 33/64, 20.5 percent, to 156, while Ciena (CIEN) gained 19 5/8, or 24.5 percent, to 99 13/16, JDS Uniphase (JDSU) rose 9 9/16 to 68 1/8, Corning (GLW) was up 7 3/4 to 69 1/4 and Cisco (CSCO) picked up 6 5/16 to 52 1/8. 3Com (COMS) missed out on the party, falling 3 11/32, or 25 percent, to 10 1/32 after warning of an earnings shortfall in the coming quarter.
Business Internet
I2 (ITWO) jumped 19 7/8, 22.6 percent, to 107 7/8 while Ariba (ARBA) soared 17 3/4, or 28.9 percent, to 79 3/16, VeriSign (VRSN) gained 14 3/8 to 101 3/8, CommerceOne (CMRC) picked up 8 1/4 to 36 1/8, Exodus (
Software
Macromedia (MACR) led the software sector to gain 11 1/2 to 77 15/16, Adobe (ADBE) jumped 8 5/8 to 76 11/16, Intuit (INTU) was up 5 3/8 to 50 7/8 and BroadVision (BVSN) picked up 5 11/16, or 29.75 percent, to 24 13/16. Microsoft (MSFT) jumped 3 7/16 to 59 7/8, Oracle (ORCL) rose 3 5/16 to 31 1/2 and Symantec (SYMC) gained 1 to 37 1/8.
Hardware
Prudential Securities reiterated a “strong buy” rating on Sun (SUNW), which boosted it 12 7/8 to 91 3/4, while Palm (PALM) was up 5 5/16 to 49 3/8, IBM (IBM) gained 5 to 103 3/8, Hewlett-Packard (HWP) picked up 2 to 35, Dell (DELL) picked up 1 7/16 to 20 1/4, Compaq (CPQ) rose 1.63 to 24.40 and Apple (AAPL) gained 5/16 to 17.
Consumer Internet
EBay (EBAY) was the big winner in this group, up 7 3/16, or 22 percent, to 39 1/2, while AOL (AOL) gained 3.07 to 44.12, Yahoo (YHOO) picked up 5 15/16 to 43 7/8, CMGI (CMGI) jumped 2 5/8, or 27 percent, to 12 5/16 and Liberate (LBRT) gained 1 3/4 to 13 1/2. Amazon (AMZN) fell 1 3/16 to 25 3/8 and Juno (JWEB) slipped 1/8 to 1 15/16.
