The stock market may wait for the
greenlight from Federal Reserve Chairman Alan Greenspan this
week before peeling out like a 16-year-old behind the wheel of a
Camaro in an extension of last week's rally.
Greenspan, who in the past has singled out rising stock
prices for contributing to exuberant consumer demand in the U.S.
economy, is set to speak on "Technology and the Economy" at a
conference at Boston College on Monday.
If the Fed head ignores Wall Street in his speech, the
stocks run-up may pick up speed after shifting into high gear on
Friday with the release of February jobs data that showed
inflation is still hibernating.
But analysts say any fresh, hawkish comments from Greenspan
on his concerns about the turbocharged equities market could
lead investors to slam on the breaks, and get a face full of
"It looks like the stock market appears to think the
employment numbers took the edge off the Fed concerns about the
the strong economy," said Pierre Ellis, senior economist at
Primark Decision Economics. "Greenspan may decide to straighten
things out on Monday."
Scott Brown, chief economist at Raymond James, said in a
research note that Greenspan used a similar talk on technology
in January to comment on concerns that the so-called wealth
effect resulting from a bull market had led demand to outpace
"Greenspan is likely to remind the markets of what he's
said before," Brown said in the note.
An extra-tight U.S. jobs market has been part of the Fed's
reason for raising interest rates four times since last June to
keep the economy from overheating.
That's why news that the unemployment rate in February had
actually ticked up a notch to 4.1 percent from a 30-year low of
4.0 percent set the stock market on a tear.
The Dow Jones Industrial averagefor the week ended up 505.08
points, or 5.1 percent, at 10367.20. The 30-stock index,
however, remains in correction zone, having fallen more than 10
percent of its Jan. 14 high of 11,722.98.
The tech-stacked Nasdaq composite index for the week jumped
324.27 points, or 7.1 percent percent, to 4,914.77 while the
broad Standard and Poor's 500 index closed up 72.81 points, or
5.5 percent, at 1,409.17.
At least one Wall Streeter was less cautious ahead of
"I think the past interest rate increases are going to be
digested before Greenspan makes any moves," said Arnie Owen,
managing director of capital markets at Roth Capital Partners in
Newport Beach, Calif. "I think this week we are going to see
follow-through in the rally. The Dow was oversold by a lot. I
think the confidence level of the investment community is
The Fed's rate-setting committee is scheduled to meet next
on March 21.
This week's menu of economic data the Fed will get to
consider ahead of that meeting is fairly light with Wall Street
mostly focused on Tuesday's release of revised fourth quarter
productivity and unit labor cost figures.
Salomon Smith Barney sees the productivity number changed to
an annualized rate of 6.5 percent from the initial figure of 5
percent. The investment bank in turn sees unit labor costs
falling by 2.6 percent for the same period.
If the figures pan out when reported, it would show that
the "new economy" paradigm that maintains technology-fueled
improvements in productivity can neutralize wage pressures
continues to hold.
But analysts said the economic news is unlikely to darken
the outlook for stocks.
"If unit labor costs come out higher than expected, that
would be a negative," said Michelle Clayman at money manager
New Amsterdam Partners. "There has been concern about rising
inflation from wage pressures, but all the indications say
that's not happening."
Analysts are also predicting the retail sector to be active
next week with Kmart Corp., Borders Group Inc., Toys R Us Inc.
and CVS Corp. among the retailers scheduled to report quarterly
earnings this week.