Investors not looking to Fed

By Lisa Singhania
Associated Press

NEW YORK — When Federal Reserve Chairman Alan Greenspan indicated last week that additional interest rate cuts were unlikely, Wall Street yawned.

Analysts say investors weren't alarmed because they've already seen evidence that the economy is stabilizing. Now they want companies to say the same thing.

But that has yet to happen. After a month of lackluster fourth-quarter results and guarded forecasts, investors still lack solid confirmation that business is improving.

Most people don't believe that the Fed, which reduced rates 11 times last year, can do much more to help.

"People feel like the Fed has given the market all the medicine necessary. Now we have to see if the economy continues to recover and if the stock market continues to respond," said Robert Streed, portfolio manager of Northern Select Equity Fund in Chicago.

"In effect, we're waiting to see if the patient sits up," he said. "So far that hasn't happened. But I believe it will."

Greenspan apparently does too. He told the Senate Budget Committee, "We are just at this particular point turning, as best as I can judge."

When asked whether Congress needed to take more steps to stimulate the economy, Greenspan said he didn't think it was essential, given signs of a rebound.

Economists and strategists took Greenspan's cautious optimism as an indication that the Fed sees no need for further rate cuts. Stocks rose modestly after the chairman testified, and ended the week higher.

The Fed's Open Market Committee is scheduled to meet tomorrow and Wednesday, but few expect the market to take much notice.

Instead, they say, Wall Street will be waiting for manufacturing and employment figures due out Friday from the Institute of Supply Management and the Labor Department, respectively. Both reports are considered good indicators of where the economy is headed.

"People are hoping the manufacturing sector is going to show growth, and the unemployment figures won't be so bad," said Larry Wachtel, market analyst at Prudential Securities. "If the economy recovers, then profits will recover. You can't have the second until the first happens."