updated 2/12/2004 7:35:23 AM ET 2004-02-12T12:35:23

The Dow Jones industrial average posted a triple-digit gain Wednesday, finishing at its highest level since June 2001, as Wall Street reacted positively to U.S. Federal Reserve Chairman Alan Greenspan’s sanguine assessment of the U.S. economy, which put to rest investors' fears of an imminent rise in interest rates.

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In the first day of Greenspan’s two-day, semi-annual testimony to Congress, which started at 11 a.m. ET, the Fed chief told the House Financial Services Committee that the U.S. economy has turned the corner to more vigorous growth , having made “impressive gains” since last summer.

The Fed chief also said policy-makers can be patient about interest-rate rises, but not forever, and predicted that the lagging jobs market should perk up in coming months. He also warned of the dangers of government deficits and a possible spike in energy prices.

“Greenspan is keen to reassure the markets that they are patient with economic growth,” said Ozan Akcin, chief market strategist at Puglisi. “The implication here is that interest rates are not likely to change quite as soon as everyone thought, even though we are certainly in a growth phase of the cycle.”

Stocks rallied as Greenspan began to deliver his testimony. By 11:15 a.m. ET, the Dow industrials were up 80 points. They moved sideways as Greenspan answered lawmakers’ questions, and then leapt above the 100-point mark as the hearing was adjourned shortly before 2 p.m. ET.

The Dow closed up 123.85 points, or 1.2 percent, at 10,737.70 and at its highest level since June 13, 2001. Broader indices also rallied.

The Standard & Poor’s 500-stock index rose 12.22 points, or 1.1 percent, to 1,157.76, while the technology-laced Nasdaq Composite index added 14.33 points, or 1 percent, and finished at 2,089.66.

Economically-sensitive stocks were among the Dow's strongest stocks, boosted by Greenspan's upbeat economic outlook. Dow component and aluminum giant Alcoa rose 5.2 percent to $37.39; Industrial machinery firm Caterpillar rose 3.1 percent to $78.96.

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Shares of Dow component Walt Disney rallied, rising 14.6 percent to $27.60, after Comcast, the largest U.S. cable television company, revealed early Wednesday it has made an unsolicited bid to buy Disney for $54 billion in stock .

The total deal is worth $66 billion, including the assumption of nearly $12 billion in debt.

Comcast’s bid was made public after Disney Chief Executive Michael Eisner declined to enter discussions. Disney, which began a two-day conference with investors Wednesday, said its board will "carefully evaluate" the unsolicited takeover bid, which would create the world's largest communications company.

Separately, Comcast posted a fourth-quarter profit Wednesday, reversing a year-earlier loss. The firm’s stock price fell 8 percent to $31. Disney reported stronger-than-expected quarterly earnings Wednesday.

The Disney takeover bid lifted the shares of a few media companies. Shares of Rupert Murdoch’s News Corporation rose 2.4 percent to $38.60, while Tribune’s stock price rose 1.5 percent to $52.84. Shares of other media companies, like Viacom and Time Warner, closed flat.

Peter Dunay, chief markets strategist and New York brokerage Wall Street Access, said news of the Disney takeover bid may give the overall stock market a confidence boost.

“People will be looking for other potential takeover targets, and that reaffirms the idea that what will be big now is the selection of individual stocks,” Dunay added. Dunay sees the banking, drug and airline sectors are possible areas of consolidation activity.

“We’re at a point in the market when there isn’t a lot going on,” Dunay continued. “Earnings were good, and the next driver for the market will be jobs data in March. For now it’s a waiting game until we have a clear indication of where rates are going.”

In earnings news, Dow component Coca-Cola said its quarterly net income dipped, hurt by a restructuring charge, higher expenses and sluggish sales of its soft drinks in North America and other key markets. Coca-Cola also said it sees higher taxes hurting its 2004 earnings growth.

Coca-Cola's stock price fell 0.7 percent to $51.80.

Insurer American International Group reported a fourth-quarter profit after suffering a loss the year before. And online job service Monster Worldwide said its quarterly earnings surpassed Wall Street's target. Monster's stock price fell 4.8 percent to $24.40.

Overseas, Europe’s major stock averages were mixed. In Japan, financial markets were closed Wednesday for a national holiday.

Reuters and the AP contributed to this report

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