Stocks' Greenspan anxiety?
Futures lower as investors await latest economic view from Fed chairman.
March 2, 2005: 8:31 AM EST
NEW YORK (CNN/Money) - Investors were awaiting the latest testimony on the state of the economy from Federal Reserve Chairman Alan Greenspan due Wednesday morning.
U.S. stock futures were down in early trading, indicating a lower opening for stocks ahead of Greenspan's 10 a.m. ET testimony on the economy and current fiscal issues before the House Budget Committee. Investors will be looking for more clues about the pace of future interest rate hikes by the Fed.
Last month, Greenspan told a Senate and a House committee that the economy is poised for continued growth with only limited threat of inflation. He was primarily asked questions during that appearance about Social Security reform, endorsing the idea of a individuals being able to direct money into private accounts.
Fed watcher Greg Valliere of the Stanford Washington Research Group said the markets are probably nervous that Greenspan will send signals that the central bank is prepared to drop its assurance of a "measured" pace of rate hikes.
"Since he made his comments two weeks ago, we got a really bad PPI (wholesale inflation) number, and the economic numbers have come in pretty strong," he said. "I think he's setting up the markets for dropping the phrase. But I can't imagine that fundamentally he'll have an economic outlook different than in his comments two weeks ago."
Valliere and Mark Vitner, senior economist at Wachovia Securities, both believe many of the questions for Greenspan will again be on Social Security and the federal budget deficit. But Vitner said traders are most nervous that Greenspan will again make comments about long-term interest rates being too low.
"I'm not too sure we're going to hear that much that will disturb markets, but I'm sure he'll say at least something hinting that long-term interest rates are too low," said Vitner.
Oil prices were off slightly early Wednesday ahead of the weekly report on U.S. fuel inventories due at 10:30 a.m.
The April light crude contract lost 21 cents to $51.47 a barrel in electronic trading, while the April contract for Brent crude fell 20 cents to $49.91.
Major markets in Asia closed mixed Wednesay, with Japan's Nikkei ending at an eight-month high but markets in Hong Kong, Taiwan and South Korea finishing lower. Major European markets were lower in early trading.
Treasury prices retreated, with the yield on the 10-year note rising to 4.39 percent from 4.37 percent late Tuesday. The dollar gained ground on the euro and the yen.
In corporate news, wholesale club retailer Costco (Research) reported improved fiscal second-quarter earnings of 54 cents a share, but that missed the consensus forecast of analysts by a penny.
Verizon Communications (Research) announced that MCI (Research) has a two-week window to hold further talks on a revised offer for the company from rival suitor Qwest Communications (Research). But Verizon's statement said it is confident that MCI will go ahead with the deal announce Feb. 14 to be purchased by Verizon.