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Market Awaits Greenspan's Technology Speech
By Eric Wahlgren   Reuters
NEW YORK — 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 airbag.

"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 supply.

"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 Greenspan's appearance.

"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 building."

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.

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