A bullish assessment of the economy by Federal Reserve Chairman Alan Greenspan sent stocks moderately higher Tuesday, but failed to give the market a major spark in what was generally a quiet session.
Greenspan’s testimony before the Senate Banking Committee, in which he praised the economy’s overall health, cheered investors somewhat. However, the Fed chairman did warn again that the central bank would keep a close eye on prices and inflation, and would aggressively raise interest rates if need be.
Because Greenspan’s message was mixed, it couldn’t help the market find a direction; Wall Street has seen mostly sluggish trading in an uninspiring earnings season, and the major indexes were again trapped within a fairly narrow range Tuesday.
“Unfortunately right now, I think investors need time to get acclimated to the economic environment going forward, rising rates, the earnings growth slowdown, things like that,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “I don’t think earnings will be the story here unless they really disappoint. It’s purely a matter of time for us to break out of this slump.”
At the close, the Dow Jones industrial average was up 55.01 points, or 0.5 percent, at 10,149.07, while the broader Standard & Poor’s 500-stock index was up 7.77 points, or 0.7 percent, at 1,108.67. The Nasdaq composite index, full of technology stocks, advanced 33.24 points, or 1.8 percent, to 1,917.07.
Greenspan’s testimony came after a disappointing housing report from the Commerce Department. Construction began on 1.8 million units in June, an 8.5 percent drop from May and the lowest level in more than a year. Combined with rising interest rates, a dip in consumer spending and profit warnings from major corporations for the rest of the year, the lack of activity in the construction sector gave investors more to worry about.
“Investors are really looking for a sign of things to come right now, and they’re not getting it in earnings,” said Brian Pears, head equity trader at Victory Capital Management. “The market, barring that one big bellwether diversified company that says something big, doesn’t have a direction, and that explains the lack of conviction we’ve seen over the past couple of weeks.”
Many investors were on the sidelines, waiting to see Microsoft’s earnings, to be released late Thursday. After the regular session ended Tuesday, the software maker announced a special one-time dividend of $3 per share and also said it would double its annual dividend to 32 cents per share. Microsoft, which finished the regular session up 37 cents at $28.32, surged another 78 cents in extended trading.
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In earnings reports Tuesday, Ford Motor Co.’s profit nearly tripled in the second quarter from a year ago, lifted by record earnings at its finance arm and improved business in Europe. Before the market opened Tuesday, the nation’s second-largest automaker said it earned $1.2 billion, or 57 cents a share, in the April-June period versus a profit of $417 million, or 22 cents a share, a year earlier. Ford was down 38 cents at $14.60.
Altria Group Inc.’s second-quarter profits rose 7.8 percent, helped by a weak dollar and a favorable tax rate. Its shares slipped 6 cents to $48.77.
Corning Co. surged $1.42 to $12.69 after it announced a profitable second quarter, reversing the losses of a year ago. The company, which beat estimates by 2 cents per share, credited increased demand for its telecommunications and display products.
In a surprise move, The Charles Schwab Corp. announced that chief executive officer David Pottruck is out and that Charles Schwab is retaking the CEO position. Pottruck said in a statement he accepted the board’s decision that he step aside. Schwab shares were up 55 cents at $8.85.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.44 billion shares compared with 1.31 billion on Monday.
Overseas, Japan’s Nikkei stock average closed down 1.55 percent. In Europe, Britain’s FTSE 100 closed up 0.4 percent, France’s CAC-40 gained 0.4 percent for the session and Germany’s DAX index climbed 0.7 percent.