Fed chief Alan Greenspan offered up his usual mixed messages about the state of the US economy Tuesday, and Wall Street responded with a suitably mixed performance.
Tech stocks were largely unbowed, but the broader market stumbled after Big Al observed that "equity prices are high enough to raise questions about whether shares are overvalued" -- a sentiment that breaks no new ground, but nevertheless sounded an alarm among investors.
The Dow Jones Industrial Average fell 35.99 points to 9516.69 in mid-afternoon trading, while the Nasdaq Composite Index was up 30.01 at 2372.02. The S&P 500 shed 4.08 to 1268.06.
The word of the day is "stretched." Greenspan told the Senate Banking Committee that "after eight years of economic expansion, the economy appears stretched in a number of dimensions, implying considerable upside and downside risk to the economy outlook." He added that the Fed is ready "to move quickly in either direction."
In the same breath, though, Mr. G noted that "our economy's performance should remain solid this year," and that "the fundamental underpinnings of the recent US economic performance are strong."
So what does all that mean for interest rates? Take your pick.
"I think he's going to take a neutral stance," said Steve Adams, managing director of Van Kasper & Co. "You're not going to see a cut, and you're not going to see an increase. They're going to let the thing take its course."
This seems to be the emerging consensus among the folk who get paid lots of money to predict the future. While recent economic stats have been strong, there's still little risk of inflation. At the same time, Greenspan sees the situation overseas, especially in Japan, remaining precarious, which would suggest that this isn't the time to tighten monetary policy.
A survey of economic forecasters by the Federal Reserve Bank of Philadelphia finds that most now don't expect as much of a slowdown this year as they did a few months back. The average of 33 private forecasts places first-half growth at 2.85 percent, way ahead of the 1.7 percent tallied in the last quarterly poll.
Meanwhile, back in the market, Rupert Murdoch's British Sky Broadcasting (BSY) advanced US$1.13 to $52 amid reports that the satellite service provider is in merger talks with France's Canal Plus SA -- a tie-up that would create Europe's biggest TV behemoth. Murdoch's News Corp. (NWS), which owns 40 percent of BSkyB, was up 19 cents at $29.38.
On this side of the Atlantic, cable outfit Adelphia Communications (ADLAC) shed $1.44 to $60.19 as it agreed to fork over more than $2 billion in cash and stock for rival FrontierVision Partners. The acquisition will add about 700,000 subscribers to Adelphia's East Coast base of nearly 2.4 million customers.
And here's the New York Post with an anonymously sourced story that USA Networks is negotiating with Cablevision Systems to buy the latter's American Movie Classics, Bravo, Independent Film Channel, and Romance Classics assets for about $2 billion. USA would use the additional channels to promote the Lycos online portal, the Post said, presuming the troubled Lycos deal goes through. Lycos would in turn give a greater Net presence to the TV properties.
USA Networks (USAI) rose $2.25 to $41.88, and Cablevision (CVC) was $1.75 higher at $66.25. Lycos (LCOS), soon-to-be parent of Wired News, climbed $4.94 to $94.56, boosted by a report that the company's online reach has increased by more than 27 percent to almost half of all Net users.
Anyway, what's really important here is that there's another auction service available online. Sharper Image (SHRP) gained $1 to $15 as it took the wraps off a new auction channel allowing customers to bid for goodies like the Turbo Groomer nose-hair trimmer and a portable AM/FM radio with built-in smoke detector.
