updated 6/9/2004 10:24:31 AM ET 2004-06-09T14:24:31

Wall Street welcomed a surprisingly forthright statement on interest rates from Federal Reserve Chairman Alan Greenspan Tuesday, with investors sending stocks higher in acceptance of his tough stand on energy prices and inflation.

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Greenspan said the Fed was prepared to abandon a gradual, measured series of rate hikes in favor of larger increases should higher oil prices trigger a more general rise in inflation.

While the prospect of larger and faster rate hikes unnerved Wall Street in the past — and did so again in the early part of Tuesday’s session — many investors were cheered by Greenspan’s uncharacteristically straightforward statement, and noted that rate hikes in response to a strong economy fit past patterns of bull markets.

“I think because this statement was so crystal clear and unambiguous, we aren’t seeing the major selling that we saw in the past,” said Hugh Johnson, chief investment officer at First Albany Corp. “He really hit this on the head, and there’s no need to parse or interpret this. That makes it a lot easier for the markets to digest and account for.”

The Dow Jones industrial average gained 41.44 points, or 0.4 percent, and closed at 10,432.52, while the broader Standard & Poor’s 500-stock index rose 1.76 points, or 0.2 percent, to 1,142.18. The tech-rich Nasdaq composite index was up 2.91 points, or 0.1 percent, at 2,023.53 by the close.

Speaking in London, Greenspan may have signaled that the Fed might raise rates by a half percentage point at the end of the month, instead of the quarter-point raise Wall Street had been expecting.

Although such a warning would have sent stocks skidding a month ago, Wall Street would now welcome a curb on inflation, given that oil prices are still near record-high levels. And analysts noted that even with a series of rate hikes through the rest of the year, interest rates would still be low compared with past bull markets.

However, trading volume has been uncharacteristically light since mid-May, which historically has not boded well for bull markets. While some of the uncertainty has left Wall Street, particularly around interest rates, some investors may be refraining from further commitments to stocks because of the possibility of a terror attack or another spike in oil prices.

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Absent that, the economy remains strong and the Fed’s rate hikes are, for the most part, already factored into stock prices, analysts said.

“I think you absolutely have to like the way the markets are acting after Greenspan spooked us a little,” said Jay Suskind, head trader at Ryan Beck & Co. “The only thing bothering me is the light volume. There’s still not a lot of interest there, but since there’s no real bad news, we can drift like this and even drift to the upside over the summer.”

Oracle Corp. gained 17 cents to $11.59 as its antitrust trial over its potential acquisition of PeopleSoft Inc. got under way. The database software maker said the deal would make the market for database software more competitive, not less. PeopleSoft was up 57 cents at $19.03.

Microsoft Corp. continued its own antitrust battles, filing an appeal of a European Union decision that would require the software giant to change its business practices. Microsoft climbed 17 cents to $26.60.

Tribune Co. dropped $1.76 to $46.92 as it announced it will cut more than 200 jobs at its newspapers due to falling advertising revenue. It also lowered its revenue forecasts for the year.

Texas Instruments Inc. reaffirmed its sales and revenue forecasts after the session Monday, remaining in line with analysts’ expectations. Texas Instruments fell 19 cents to $26.04.

Declining issues outnumbered advancers by about 5 to 4 on the New York Stock Exchange, where volume was light. The Russell 2000 index of smaller companies was down 0.99 point, or 0.2 percent, at 577.91 by the close.

Overseas, Japan’s Nikkei stock average rose 0.7 percent. In Europe, Britain’s FTSE 100 closed up 0.3 percent, while Germany’s DAX index and France’s CAC-40 were both flat for the session.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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