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THE STOCK MARKET got a bit of a boost this morning as Federal Reserve Chairman Alan Greenspan warned the economy is facing a sharp slowdown, but added that it could pick up once businesses burn off unsold inventories.
In the prepared text of his semiannual testimony to Congress on the economy, Greenspan said the slowdown was much more sharp than expected and consumers now appear less confident
The remarks appeared to leave open the chance for more interest-rate cuts, which, on first glance, pleased traders.
At 10:15 a.m. ET, the Nasdaq Composite Index was up 55, getting about a 15-point boost as Greenspan's remarks were posted on the Fed's Web site. The Dow Jones Industrial Average gained 20. It had been up five before the posting. The S&P 500 index rose four.
Greenspan's commentary follows a government report that gave hope to those who think the downturn will be short. Retail sales rose a strong 0.7% in January, the fastest gain since September compared with expectations of 0.5% as stores ran post-Christmas sales to unload all the stuff we didn't buy during the holidays. Furniture and apparel were among the leaders, along with building materials and restaurant meals. December's gain was a paltry 0.1%. While one month doesn't a trend make, the numbers helped the techs put in a temporary bottom.
The utterances of Greenspan in his semiannual Congressional testimony will influence how stocks fare in the days ahead as traders try to shake off a long-running litany of profit woes and try to envision a brighter future.
Greenspan said the sharp stall in economic growth late last year left many businesses with excess inventory as sales slowed. That's the big reason the Fed was aggressive in cutting interest rates a full percentage point in January, he said.
However, Greenspan didn't predict a recession, saying growth will probably be 2% to 2 1/2% for the year.
In the prepared text of his semiannual testimony to Congress on the economy, Greenspan said the slowdown was much more sharp than expected and consumers now appear less confident
The remarks appeared to leave open the chance for more interest-rate cuts, which, on first glance, pleased traders.
At 10:15 a.m. ET, the Nasdaq Composite Index was up 55, getting about a 15-point boost as Greenspan's remarks were posted on the Fed's Web site. The Dow Jones Industrial Average gained 20. It had been up five before the posting. The S&P 500 index rose four.
Greenspan's commentary follows a government report that gave hope to those who think the downturn will be short. Retail sales rose a strong 0.7% in January, the fastest gain since September compared with expectations of 0.5% as stores ran post-Christmas sales to unload all the stuff we didn't buy during the holidays. Furniture and apparel were among the leaders, along with building materials and restaurant meals. December's gain was a paltry 0.1%. While one month doesn't a trend make, the numbers helped the techs put in a temporary bottom.
The utterances of Greenspan in his semiannual Congressional testimony will influence how stocks fare in the days ahead as traders try to shake off a long-running litany of profit woes and try to envision a brighter future.
Greenspan said the sharp stall in economic growth late last year left many businesses with excess inventory as sales slowed. That's the big reason the Fed was aggressive in cutting interest rates a full percentage point in January, he said.
However, Greenspan didn't predict a recession, saying growth will probably be 2% to 2 1/2% for the year.
