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Wall Street unsettled
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February 23, 1999: 5:39 p.m. ET
Greenspan puts pressure on blue chips, but technology stocks rally
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NEW YORK (CNNfn) - Wall Street gave a mixed performance Tuesday after Alan Greenspan made investors nervous by praising the strong economy but questioning valuations in the stock market.
His words, cautious and balanced as always, knocked the wind out of blue-chip stocks, but failed to prevent technology issues from rallying yet again and extending their recovery from last week's sector rumble.
In his prepared, semiannual Humphrey-Hawkins testimony to Congress, Greenspan praised economic growth, but said both upside and downside risks are high after eight years of robust expansion. In a statement that sent a wave of shivers through the stock market, he raised the question about high stock valuations.
"Equity prices are high enough to raise questions about whether shares are overvalued," the Fed leader said early in his testimony, immediately sending a chill through Wall Street.
Greenspan's words of caution had the strongest effect on blue-chip stocks, sending the Dow Jones industrial average in and out of positive territory several times. In the end, the Dow closed 8.26 points lower at 9,544.42. Market breadth on the New York Stock Exchange was negative, with advances trailing declines 1,263 to 1,716 as 771 million shares traded.
The Fed chief's talk about overvaluation, however, did little to divert investors from their newfound taste for technology stocks. The Nasdaq Composite rallied 34.34 points, or 1.47 percent, to 2,376.35. The S&P 500 index eased 0.96 to 1,271.18.
Although Greenspan said in his testimony that the Fed is prepared to react quickly and push interest rates in either direction, the remainder of his testimony seemed to lead investors to believe that a rate tightening is much more likely over the near term.
Charles White, president and portfolio manager at Avatar Associates, said the Fed has shifted toward a neutral and possibly tightening bias, but a small interest-rate increase is unlikely to stop the booming economy, or derail the long-term stock market climb. (672K WAV) or (672K AIFF)
Concerns about rising interest rates were obvious in the bond market, which headed lower as soon as Greenspan spoke. The benchmark 30-year Treasury bond fell 30/32 of a point in price, raising the yield to 5.42 percent.
The dollar eased from its earlier highs against the yen and the euro, showing little reaction to Greenspan's comments.
Techs at the wheel
Technology stocks once again took leadership in the market, extending their recovery after last week's meltdown and Monday's strong rally.
Among the day's newsmakers, the stock of Micron Technology (MU) climbed 2-3/16 to 70-5/16 after Donaldson, Lufkin and Jenrette upgraded the company to "buy" from "market perform."
Elsewhere in the tech sector, Dell (DELL), one of the sector's biggest losers last week, continued to recover, rising 2-3/16 to 87-1/16. Dell competitor Gateway (GTW), which Monday reaped the benefits of an analyst's upgrade, rallied 3-3/16 to 82-1/2.
Microsoft (MSFT) surged 6-5/8 to 155-7/16, Cisco (CSCO) climbed 7/8 to 102-15/16 and Intel (INTC) rose 1-7/16 to 134-1/4.
Among the Dow's tech components, IBM (IBM) inched down 11/16 to 177-1/4 and Hewlett Packard (HWP) eased 3/4 to 73-1/8.
Investors also showed appetite for some heavy-duty Internet issues, especially after Morgan Stanley Dean Witter analyst Mary Meeker spoke favorably about the sector.
Shares of Yahoo! (YHOO) gained 7-1/8 to 152-7/8, Amazon.com (AMZN) rallied 8-11/16 to 115-3/16 and eBay (EBAY) jumped 3-7/8 to 282-5/8 after Meeker painted a bullish long-term outlook for the sector.
Financials strong again
Financial stocks, the second-largest driving force behind Monday's powerful surge on Wall Street, also extended their bull run into a second day.
American Express (AXP) rallied 3-1/8 to 11-5/8, J.P. Morgan (JPM) advanced 2-5/16 to 115-7/16 and Citigroup (C) gained 2-3/4 to 58-3/16. All three are Dow components. Donaldson, Lufkin & Jenrette upgraded its rating on Citigroup to "buy" from "market perform," while Warburg Dillon Read reiterated its own "buy" rating and raised its first-quarter earnings estimates for the financial conglomerate.
Among the sector's other heavyweights, Chase Manhattan (CMB) rose 7/8 to 81-7/8 and BankAmerica (BAC) climbed 1-5/16 to 66-15/16.
The day's other prominent movers included shares of upscale retailer Nordstrom (NOBE) which tumbled 2-3/16 to 70-5/16 after late Monday the company revealed a 5.4 percent decline in same-store sales in the fourth quarter.
Finally, shares of regional airline America West (AWA) tumbled 3-1/4, or more than 15 percent, to 18-1/8 after the company Monday canceled all merger talks. Several airlines, including the parent of the nation's largest carrier UAL (UAL), Delta Air Lines (DAL) and Continental Airlines (CAI.B) had been interested in taking over America West.
(Click here for a look at today's CNNfn market movers)
(Click here for a look at today's CNNfn technology stocks report.) 
-- by staff writer Malina Poshtova Zang
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