- The Washington Times - Wednesday, February 11, 2004

NEW YORK (AP) — Investors anxious to get back into the stock market jumped on Federal Reserve Chairman Alan Greenspan’s bullish economic report yesterday, sending stocks soaring and propelling the Dow Jones Industrial Average up 123 points to its highest level in more than 2 years.

Mr. Greenspan, in testimony before a House committee, gave a better-than-expected assessment of inflation and the overall economy and reiterated the Fed’s current stance that it could remain patient before eventually raising interest rates.

Investors, having sat on the sidelines for weeks amid uncertainty about the economy, responded to Mr. Greenspan with a wave of buying. The Dow gained 123.85, or 1.2 percent, to 10,737.70. It was the highest the Dow has been since June 13, 2001, and is less than 1,000 points shy of the index’s record close of 11,722.98, set Jan. 14, 2000.

Broader stock indicators also rose sharply. The Standard & Poor’s 500 Index was up 12.22, or 1.1 percent, at 1,157.76. The Nasdaq Composite Index climbed 14.33, or 0.7 percent, to 2,089.66.

Stocks drew the most momentum from the Fed’s lowered inflation estimate, which fell by 0.25 percentage point from its projection of last July.

While Mr. Greenspan stated that interest rates would eventually have to rise to combat inflation, investors were apparently satisfied when he did not give a timetable for a rate increase. They also ignored his warning that increasing federal budget deficits could hurt the economy.

The Fed chairman also said the GDP is now expected to grow between 4.5 percent and 5 percent in 2004, up from a July forecast of 3.75 percent to 4.75 percent. Investors interpreted the revision as a sign that corporate profits will also grow at a stronger rate this year.

As investors returned to the market, volume was much heavier than the average for the past few weeks, which saw uneven, directionless trading punctuated by single days of sharp movements based on the latest news.

Wall Street was also digesting a surprise $54 billion bid by cable company Comcast Corp. for the Walt Disney Co.

The Disney takeover bid, in which Comcast is offering 0.78 shares of its stock for every share of Disney, is seen by many investors and analysts as another sign of broad economic recovery.

Comcast also beat earnings estimates by 14 cents per share, but had its rating cut to “neutral” by two investment houses. Another analyst questioned whether Comcast’s offer for Disney was too low. Comcast dropped $2.70 to $31.23.

Disney, which released its earnings ahead of schedule on the merger news and easily beat expectations by 10 cents a share, jumped $3.52, or 15 percent, to $27.60. An estimated 107 million shares of Disney, a Dow component, traded hands during yesterday’s regular session, far above its daily average of 8 million.

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