Friendly Fed Jolts Stocks to Life By Stephanie Mercurio CNBC.com Markets Reporter
Dec 5, 2000 12:25 PM
The Nasdaq surged 8% and the Dow Jones industrials rose 3% after Federal Reserve Chairman Alan Greenspan promised to guard against a severe economic slowdown, pleasing investors who hope for an interest-rate cut sometime soon.
Investors also were encouraged by signs the presidential election saga might soon end after two court rulings in favor of Texas Governor George W. Bush.
Near midday, the Nasdaq Composite had jumped 214 to 2,830, the Dow Jones industrial average gained 301 to 10,859 and the S&P 500 was up 41 to 1,366.
Greenspan spoke at a New York business strategy conference late this morning, where he hinted the central bank will remove its longstanding bias toward higher interest rates. Investors love the news, analysts say, because it suggests the Fed's willingness to stimulate the economy before growth cools too sharply.
"This says that they are at least going to move to a neutral bias, and he is talking about the possibility of excessive softness (in the economy). That is a suggestion that they are thinking about easing," says Carol Stone, deputy chief economist for Nomura Securities. "This speech was almost a gift. Clearly, he didn't talk around the issues."