NEW YORK (AP) — Wall Street staggered through an indecisive session yesterday, ending modestly higher as investors’ interest-rate worries robbed them of any incentive to make sizable commitments to stocks. The market again shrugged off upbeat earnings reports, although tech stocks posted the largest gains in response to Motorola Inc.’s strong results.
For the second day in a row, Federal Reserve Chairman Alan Greenspan told a congressional committee that the economic recovery is deepening and that interest rates will have to rise at some point, though he didn’t say when.
“As I have noted previously, the federal funds rate must rise at some point to prevent pressures on price inflation from eventually emerging,” Mr. Greenspan told the Joint Economic Committee.
Similar testimony by Mr. Greenspan to the Senate Banking, Housing and Urban Affairs Committee on Tuesday led to a sharp sell-off in stocks.
The major indexes moved in and out of positive territory as investors also vacillated. The Dow Jones Industrial Average ended up 2.77, or 0.03 percent, at 10,317.27 after falling more than 120 points Tuesday.
The broader gauges were helped by Motorola. The Nasdaq Composite Index rose 17 points, or 0.9 percent, to 1,995.63. The Standard & Poor’s 500 index was up 5.94 points, or 0.5 percent, at 1,124.09.
The mood on Wall Street has become so foul that investors who for months sought a strengthening economy and higher earnings are now selling despite many signs of economic and corporate health. Since the government issued a higher-than-expected consumer price report a week ago, the stock market has been fixated on the prospect of higher interest rates — and become even more uneasy this week as Mr. Greenspan confirmed investors’ fears.
Most economists don’t expect the Fed to raise rates at its next meeting on May 4, but many believe rates will move higher by the end of the summer.
Richard E. Cripps, chief market strategist for Legg Mason in Baltimore, said he believed investors were overreacting to the expected rate increases.
“The reason interest rates are going up is for the right reason — the economy is stronger, and we’re starting to see it broadly domestically and synchronous globally. And that’s positive,” Mr. Cripps said.
Still, Robert Christian, chief investment officer at Wilmington Trust Co., said he believed some investors hadn’t faced up to the reality of interest rate increases before Mr. Greenspan’s latest testimony.
Talk of inflation and interest-rate increases by Mr. Greenspan is “just going to hit you smack in the face and makes you sit up and take notice,” Mr. Christian said.
The bright spot for the market was Motorola, which jumped $3.08 to $19.30 after surprising Wall Street and shareholders late Tuesday with its strongest quarter in years prompted by surging sales of new cell phones and other products. First-quarter profits more than tripled to $609 million and revenue came to $8.6 billion, nearly $2 billion higher than the forecast.
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