Posted on: Thursday, February 17, 2005
Markets close mixed as Fed hints new rate hike
By Meg Richards
Associated Press
NEW YORK — Stocks staggered to a mixed finish yesterday after Federal Reserve Chairman Alan Greenspan told a congressional committee the economy is strong, a sign that the central bank is likely to continue raising interest rates.
His remarks seemed to support the views of many economists that the Fed will likely stick with its policy of raising interest rates at a gradual pace. The dollar firmed against other currencies, gold declined and Treasuries weakened, but stocks stalled as investors tried to discern how far the rate tightening would go.
"The problem for stocks is there's no end in sight," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Greenspan still thinks rates are too low, and he has no intention to stop raising rates."
Greenspan said Fed officials have been "confounded" by the bond market's reaction to its monetary policy. Bonds have rallied as the Fed raised short-term rates, sending the yield on the 10-year Treasury note below 4 percent last week.
The 10-year note fell yesterday, and the yield stood at 4.16 percent — 46 basis points lower than it was on June 30.
Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange. Consolidated volume came to 1.95 billion shares, compared with 2 billion traded Tuesday.
Greenspan also told the Senate Banking Committee that while inflation is not an immediate threat, it remains something policymakers must guard against.
