Greenspan lights a rocket under Dow
Traders appeared to be reacting in particular to Tuesday's remarks by Alan Greenspan, chairman of the Fed, in which he hinted that interest rates may be allowed to stabilise amid growing signs that last year's rapid economic growth may be subsiding.
Fearful that surging growth, falling unemployment and low inventories would trigger new inflationary pressures, the Fed raised interest rates seven times in the past year, doubling short-term rates. Mr Greenspan's remarks suggested, however, that the Fed may have succeeded in curbing inflationary impulses as well as slowing growth and preparing the economy for the holy grail of a soft landing.
Mr Greenspan said he expected growth this year of between 2 and 3 per cent, down from 4 per cent in 1994.
The blue-chip index penetrated the psychologically important 4,000 level after less than an hour of trading yesterday and by late morning was up by more than 40 points on the day. The bond market was also higher, with the US 30-year bond up than half-a-point early on.
Some analysts expressed confidence that the rally should be sustainable, with the Dow perhaps staying above 4,000 for some time. "As long as the economy doesn't show signs of uncalled for strength, we're okay," said John Manley, managing director of Smith Barney. "Mr Greenspan has done a very good job. This is the perfect environment for stocks."
Joe Battipaglia, of investment bankers Gruntal Co. similarly predicted that the upward trend on the Dow would continue. "I suspect this is starting something bigger," he said.
The prospect of steady, or eventually even falling US rates, had a less favourable effect on the dollar yesterday, which sank against both the yen and sterling.
- 1 Lord Sewel quits: Peer 'boasts of having sex with BBC presenter and seeing 13 mistresses'
- 2 Kenya President Uhuru Kenyatta clashes with President Obama on LGBT equality: ‘Gay rights is really a non-issue’
- 3 Topshop pulls 'ridiculously skinny' mannequins after being shamed by customer on Facebook
- 4 Five-year-old boy forced classmate to simulate oral sex at primary school, claims mother
- 5 Black and ethnic minority people twice as likely to be hit by Tory cuts than white people, report finds
Mystery over deaths of 3,000 Napoleonic soldiers in mass grave has been solved
Boris Johnson apologises after giving his wife a 'backie' on his bike on the streets of London
Black and ethnic minority people twice as likely to be hit by Tory cuts than white people, report finds
Labour leadership: New poll shows party is now even 'less electable' than under Ed Miliband
Rolling Stones guitarist Keith Richards, 71, still enjoys 'an early morning joint' for breakfast
The 9 charts that show the 'left-wing' policies of Jeremy Corbyn the public actually agrees with
Labour leadership contender Jeremy Corbyn says 'we can learn a great deal from Karl Marx'
The last thing Labour needs is a leader like Jeremy Corbyn who people want to vote for
What the Labour party could look like under Jeremy Corbyn
I am the Jeremy Corbyn supporter that many will tell you doesn't exist
Public anger after French sunbather beaten up by gang for wearing a bikini in Reims park
iJobs Money & Business
£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...
£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...
£30000 - £35000 per annum + benefits : Ashdown Group: Finance Accountant - Fin...
£90000 - £98000 per annum + benefits : Ashdown Group: A truly exciting opportu...