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Relief lifts Wall Street
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June 13, 2000: 5:12 p.m. ET
Investors soothed by Greenspan speech; techs boost Nasdaq, Dow
By Staff Writer Catherine Tymkiw
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NEW YORK (CNNfn) - U.S. stocks rallied Tuesday after Federal Reserve Chairman Alan Greenspan made no mention of interest rates in an afternoon speech, giving investors some hope that borrowing costs won't go much higher this month.
The day's gains also came after the latest government report, this one on May retail sales, showed the economy may be cooling.
"What really happened today is the retail sales report set the right tone," Ned Riley chief investment strategist at State Street Global Advisors, told CNN's Street Sweep. "It appears that consumer spending is down."
Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum, agreed. "The retail sales numbers we saw should have presumed a rally but we had some selling in Hewlett-Packard and NBC Internet. During the day, people started to realize that retail sales were good news," he said.
Analysts said investors are keen to digest any rhetoric by the Federal Reserve ahead of its June meeting, in an attempt to glean what path the Fed may take on interest rate policy.
Greenspan offered no guidance on that policy in his speech about productivity to the New York Association for Business Economics. Analysts said this soothed some of the inflationary concerns about a negative impact on corporate profitability.
"There was nothing Greenspan said that was harsh and sometimes no news is good news," explained Hyman.
 The Nasdaq came back from earlier losses to jump 83.16 points, or more than 2 percent, to 3,851.07. The Dow Jones industrials gained 57.63 to 10,621.83, and the S&P 500 rose 23.44 to 1,469.44.
But weak volume reflected a lack of investor conviction. Market breadth was leaning positive. "I think the market just retreated enough, but we're seeing this on relatively light volume," said Peter Coolidge, senior trader at Brean Murray & Co. "This is an encouraging step, but that's all it is."
 Advancing issues on the New York Stock Exchange topped declining ones 1,735 to 1,198, on volume of 901 million shares. Nasdaq winners beat losers 2,046 to 1,997, as more than 1.3 billion shares changed hands.
In currency markets, the dollar weakened against the euro but was unchanged versus the yen. Treasury securities were little changed.
Economic slowdown in place
After six interest rate hikes by the policy-making body of the Federal Reserve, investors have been looking for any shred of evidence that the economy is slowing and interest rate hikes may be coming to an end. The Federal Reserve will hold its next meeting on June 27-28.
"All of the government statistics have been far less scary than consensus expectations," said Charles Crane, portfolio manager at Spears Benzak Salomon & Farrell. "(Retail sales) were weaker than anticipated and seem to be consistent with the tone."
U.S. retail sales surprised economists with their second consecutive monthly decline in May. Retail sales fell 0.3 percent last month, compared with a revised 0.6 percent drop in April, according to the Commerce Department. Excluding autos, sales were unchanged compared with a 0.4 percent decline in April.
On Wednesday and topping the list of key data for the week, the U.S. Labor Department will report the Consumer Price Index (CPI) for May. The CPI is the government's main barometer on inflation.
Analysts polled by Briefing.com expect the CPI to grow to 0.2 percent from the previous 0.1 percent within the core index; that core excludes volatile food and energy prices, which are expected to remain flat at 0.2 percent.
"If we get a CPI number that is out of line or higher than expected, there could be real trouble because the last thing you want to see is the economy slowing which generates concern about profits and inflation continuing to move higher," said Bill Meehan, chief market strategist with Cantor Fitzgerald. "The sense I get is there is not any expectations that the CPI is going to generate any negative surprise and I think you'll see some money get thrown into the market."
Techs turn around
Stocks were lower before Greenspan's remarks, as traders waited to see if his word brought direction. At the time, Linda Jay, a New York Stock Exchange trader for RPM Specialist, told CNNfn's Market Call that certainty about interest rates is necessary to break the market out of its doldrums. (317K WAV) (317K AIF)
Much of the day's selling was prompted by Dow component Hewlett-Packard (HWP: Research, Estimates), which fell 7 to 119, after Sanford J. Bernstein downgraded the firm to "market perform" from "outperform" and lowered its earnings expectations for the remainder of the year.
 "While we do believe Hewlett-Packard's strong brand franchise and worldwide growth opportunities make it an attractive long-term core technology holding for investors, we maintain that mounting risk and rising expectation do not provide an attractive entry at current valuation levels over the short term," the firm's analysts wrote in a research note.
But pharmaceuticals attracted buyers to offset the losses. Merck (MRK: Research, Estimates) gained 3-1/2 to close at 73-7/16 and Johnson & Johnson (JNJ: Research, Estimates) rose 3-7/16 to 88-3/16.
 Tech issues were the main beneficiaries when buyers came back to the bargain bins. IBM (IBM: Research, Estimates) gained 7/8 to 119-11/16, Cisco Systems (CSCO: Research, Estimates) advanced 2-7/8 to 65, and Intel (INTC: Research, Estimates) rose 6-7/16 to 131-1/2
Analysts said that stocks were still vulnerable to any news that might affect a companies' potential for strong earnings growth. Web content company NBC Internet (NBCI: Research, Estimates) slumped 7 to 17-5/8, after saying it forecast lower revenue and greater losses than analysts expected for the second quarter and the remainder of the year due to anticipated near-term effects of its announced business strategy changes.
"People are questioning what kind of business model do you need for the portal world if a player like NBCi, which has a substantial backer (the NBC TV networks and their parent, General Electric), can't make money here," said Ehrenkrantz's Hyman. 
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