Market briefing---Lane (medium)
The discussions regarding rule based policy and discretion---Craig (fast)
Nasdaq---Anthony (slow)
welcome to “world financial report”. i’m lane bajardi in new york. the dow industrial average up 41 points to 9,415, led by shares of caterpillar, general motors and merck. viacom, intel, and bank of america led the s&p 500 to a five-point gain settling at 1,008. the nasdaq composite rose 10 points to 1,810, for a gain of a half percent. nextel was the leading nasdaq gainer there, and among the most actives as well, with intel and core vis. lucent, pfizer and a.m.d. among the most actively traded on the board along with general electric down 11 cents. the dow rose 3 quarters of a percent, the s&p 500 grew 1.5%, and the nasdaq gained 2.5%. treasuries fell after an index of chicago area manufacturing rose to the highest in more than a year, bolstering optimism about the pace of the economic recovery. take a look at the 10-year and five-year note, 10-year yielding 4.46%. five-year note down 9/32, 3.46% the yield. on the short end, each, the three-year and two-year down 3/32. in currency trading the yen rose to a three-month high against the dollar in new york after japan’s factories boosted production and the government said it refrained from selling yen in the month of august. now, alan greenspan rejected using an inflation target to set u.s. interest rates, saying it would rob policymakers of flexibility to respond to economic developments. the federal reserve chairman spoke at the kansas city fed conference in jackson hole, wyoming. the fed chairman favors personal judgment over a rule based model in dealing with an economy as complex as the one in the united states. bloomberg’s craig torrez asked the former head of research on the new york fed on where the discussion stands now.
>> we finished the first day of meetings at jackson hole. i’m here with professor fred mish can. professor mish can was head of research at the new york federal reserve and a participant in the fomc. how would you characterize the discussions regarding rule based policy and discretion so far?
>> well, i think we also have to be careful about what we mean by “rule based policy.” clearly the issue of whether we should have instruments set by rule is something that i think is a terrible idea. in fact, that was exactly what greenspan’s speech was about. very different is when we talk about something like a rule which is not really a rule. we sometimes call it a targeting rule, you have something like an inflation target, which actually does not imply that you actually operate according to a rule. it says you are trying to get to a certain kind of objective, and in fact you have to use all the central banking, recognizing you don’t quite know where the economy is. the economy may have changed. there is a lot of uncertainty. and in each different instance you may have to do something different, but you always keep your eye on the goal of trying to hit your inflation goal.
>> a number of fed officials have recently called to adopt an inflation targeting, arguing it would make the fed’s intentions to raise or lower rates clearer and reduce volitility in the markets. the nasdaq outperformed the dow and s&p as it gained 2.5% this week. in fact, it was up 4.3% for the month of august. anthony massucci has details from the nasdaq market site in times square.
>> and the nasdaq is above 1800 for the first time in 16 months. semiconductor stocks leading the way higher. in fact, semiconductors up 17% in august. the philadelphia semiconductor index, that’s the percentage gained for the week, up 4%. that’s even with novellus trading down for the day. now, novellus had a month seeing the stock going up 12%, but today it went lower when rick hill said sales may be a little bit lower than what the company said they would be back in july.
>> now, he declined to predict business beyond this quarter, but did say spending appeared to be improving. he did say the economy looks to be recovering and that he thinks things continue to pick up. again, shares of the novellus traded lower this friday. bank of america analyst mark fitzgerald thinks any higher move on novellus could be limited. he likes this stock at $38 a share. on tuesday, looking ahead, altera has its mid quarter call. this semiconductor company is expected to leave its sales and earnings forecast unchanged, according to s.g. cowan today. that news rounding out the chip stocks which finished the day higher. biotech stocks , though, higher for the day. let me show you a few names. human genome, protein design, chiron trading up. telecom stocks also in the news. nextel shares were up. shares may double in the next year and a half to two years, according to business week’s “inside wall street” column. they think company earning growth will help boost the stock . the company was also invested by berkshire hathaway’s warren buffett, buying nextel bonds and preferred stock , face value of $500 million. this reported this state regulatory filings. stock wear―software stock , peoplesoft, shares should go up a30% according to robert snell. he’d like the stock to go to $23. the nasdaq is up, in fact for the year $36%. back to you in the studio.
>> anthony massucci at the nasdaq. sales of server computers rose for the first time in 2 1/2 years during the second quarter. international business machines edged ahead of hewlett-packard in server sales after sharing the number one spot a year earlier. according to market researcher i.d.c. rising demand for machines using intel chips boosted sales to 10.6 billion, the first signs of growth since the last quarter of 2000. intel chips cost less, making machines that use them more attractive to information system managers. when we come back, two household names in the automotive industry are celebrating their noturey mark this year. while one is riding high on the hog, one is hitting some bumps in the road.
