Markets rally on Greenspan talk, economy news

The markets finish in positive territory after a favorable retail sales report and a tame speech from the Federal Reserve chairman give investors the green light.

3 min read
The markets finished in positive territory after a favorable retail sales report and a tame speech from Federal Reserve chairman Alan Greenspan gave investors the green light.

Retail sales fell for the second month in a row, a good sign for investors and policy-makers who worry about the onset of an overheating economy.

The Commerce Department said retail sales for the month of May fell 0.3 percent to $266 billion. The government revised April sales to a 0.6 percent drop from a 0.2 percent decrease previously. But the retail sector is still going strong for the year despite recent drops; retail trade has increased 10.3 percent over last year's pace.

"The retail sales number was excellent," said Prudential market strategist Bryan Piskorowski. "(The numbers) are building a case for a slowing economy and building a case for lower inflation."

News of a slower economy is a welcome sign to investors and gives hope that the Federal Reserve will not raise interest rates again to cool the roaring economy. A raise in rates makes money expensive to borrow.

Greenspan also encouraged investors by not talking about monetary policy or giving hints on future interest-rate changes in a speech today before the New York Association for Business Economics.

Greenspan primarily discussed the positive effects of technology on productivity and the challenges of measuring productivity in an economy driven by new technology.

Investors will not get much relief from Federal Reserve worries, as the Labor Department will release consumer price index data tomorrow, a key measure of inflation.

Yet investors ignored tomorrow's pending news and ran with the news today, sending the Nasdaq composite index up 83.15 to 3,851.06 and the Standard & Poor's 500 index up 23.44 to 1,469.44.

The Dow Jones industrial average rose 57.63 to close at 10,621.84, led by Home Depot.

At the end of regular trading, Intel closed up $6.44 at $131.50. Microsoft gained $1 to $67.88.

Microsoft this afternoon filed its motion of appeal in its landmark antitrust case with the government. At the same time, the U.S. District Court for the District of Columbia issued an order that it would expeditiously hear any appeal.

The CNET tech index rose 52.35 to close at 2,836.99. Winners edged out losers, with 66 of the 98 stocks in the index rising, 30 falling and two remaining unchanged.

Of the 18 sectors tracked, computer memory storage companies posted the biggest gains, rising 3 percent. Internet content companies were the day's largest losers, falling 1 percent.

Among members of the CNET Tech Index, Citrix Systems and Vitesse Semiconductor posted strong gains.

Vitesse rose $8.88, or nearly 13 percent, to $79.63. Citrix rose $2.69, or 12 percent, to $24.94 after yesterday's sell-off. Citrix was the most actively traded stock on the Nasdaq. Volume topped 52 million shares, more than six times the stock's average daily volume.

Shares of Adaptec fell on earnings worries for the quarter. The maker of electronic components that speed communications between computers fell 88 cents to $17.13 on a volume of 7.5 million shares, or more than three times its daily average of 2.2 million.

The Philadelphia semiconductor index rose 56.29, or 5 percent, to 1,170.53, led by chip set designer Rambus, which jumped $29.75, or about 14 percent, to $248.56.

Internet advertisers hope that a deal with the government will boost their sagging stock prices. The developing industry is heading toward an agreement with federal regulators for voluntary rules to protect the privacy of people using the Net.

Internet toy retailer eToys, whose shares have dropped 92 percent from their high, said it raised $100 million through the sale of preferred convertible stock and warrants to stay in business into next year. eToys closed down 16 cents at $6.25.