NEW YORK (CNNfn) - What started as a hopeful rally on Wall Street ended with fireworks Wednesday after Alan Greenspan gave the market his strongest hint so far that the time is coming for the Federal Reserve to ease interest rates.
The Dow Jones industrial average soared 257.21 points, or 3.3 percent, to 8,154.41. On the New York Stock Exchange, some 904 million shares traded. Advances trounced declines 2,362 to 783.
The Nasdaq Composite rose 62.47, or 3.7 percent, to 1,760.27, lifted for the second day in a row by strength among Internet shares. The S&P 500 index gained 36.46, or 3.5 percent, to 1,066.09. The Russell 2000 index of small-cap stocks rose 7.76, or 2.1 percent, to 376.00.
Clear signs of jubilation could be detected in the market as investors heard the latest views on the world economy from Greenspan. In his strongest suggestion yet that the Fed is ready to ease interest rates, the Federal Reserve chief said deteriorating international economies have "increased the possibility that the slowdown in the growth of the American economy will be more than sufficient to hold inflation in check."
Appearing before the Senate Budget Committee, Greenspan said there are few signs yet that the Asian crisis has abated or will do so soon. Moreover, in a question-and-answer session following his testimony the central banker said the Fed must act fast to quell the global turmoil's effects on U.S. growth.
"I do think that we have to bring the existing instability to a level of stability reasonably shortly to prevent the contagion from really spilling over and creating some very significant kinds of problems for all of us," Greenspan said.
The Federal Open Market Committee, the Fed's policy setting body, is scheduled to meet next Tuesday.
Despite the rally on Wall Street, Nick Sargen, global market strategist at J.P. Morgan's Private Client Group, said it is not certain yet when the Fed will lower rates and more volatility could be in stock for the stock market. (125K WAV) or (125K AIFF)
The bond market closed mostly higher after hearing Greenspan's words. The benchmark 30-year Treasury bond, however, finished 7/32 of a point lower in price, for a yield of 5.16 percent.
The dollar slipped against the Japanese yen and the German mark after Greenspan raised the prospects of lower interest rates, which could hurt the currency in the long term.
First previews of the latest earnings
In the stock market, apart from the Fed chief's testimony, investors focused on earnings-related news after several high-profile companies reported results while others issued profit warnings.
Among the market gainers, shares of Lehman Brothers (LEH) rallied 1-3/4 to 37-7/8 after the company reported a third-quarter profit early Wednesday that was in line with market expectations. The news came on the back of market rumors last week that the Wall Street institution could be driven out of business by trading losses suffered in the global market turmoil.
Other brokerages derived strength from Lehman's gains, leading shares of Merrill Lynch (MER) up 4-5/16 to 58 and Donaldson, Lufkin & Jenrette (DLJ) up 3-15/16 to 31-7/16. This, despite a disappointing earnings report and a bleak forecast late Tuesday by one of Wall Street's other powerhouses, privately held Goldman Sachs.
Contributing to the rally among blue-chip financials, shares of Dow member Travelers (TRV) jumped 3-5/8 to 43 and its proposed merger partner Citicorp (CCI) surged 10-3/8, or almost 11 percent, to 105-1/2 after the Federal Reserve gave a conditional approval to their marriage, one that would create the world's largest financial services firm.
Companies that warned investors of trouble in the latest quarter didn't fare quite as well. Shares of PhyCor (PHYC) tumbled 2-5/32, or more than 29 percent, to 5-5/32 after the physician practice management company said it expects its third- and fourth-quarter results to fall below Wall Street forecasts.
Following the announcement, Warburg Dillon Read downgraded the stock to "reduce" from "strong buy." Phycor topped the list of net losers on the Nasdaq. Its main rival, MedPartners (MDM) also traded sharply lower after a downgrade to "hold" from "strong buy," also by Warburg.
In the same basket, shares of Harsco (HSC) tumbled 12-5/16, or almost 35 percent, to 24-5/16 after the manufacturing and industrial services firm said its 1998 operating income will fall below previous estimates. Harsco was the leading net loser on the NYSE.
And Stanley Works (SWK) plunged 4-1/4, or more than 13 percent, to 28 after it too issued a profit warning for the third quarter.
Elsewhere among the newsmakers, pharmaceuticals had a good morning on the back of positive news from two members of the sector.
Shares of Millenium Pharmaceuticals (MLNM) rallied 1-7/16, or more than 8 percent, to 18-11/16 after the company formed a research alliance with Bayer AG of Germany. And the stock of Schering-Plough (SGP) gained 3-1/4 to 104-7/8 after that company announced a 2-for-1 stock split, repeated its forecast for 20-percent growth in earnings per share this year and named President and Chief Executive Richard Kogan as company chairman.
Also helping the drug sector, Southeast Research Partners raised its ratings on a number of large pharmaceutical companies.
(Click here for a look at today's CNNfn market movers.) 
-- by staff writer Malina Poshtova Zang
|
