NEW YORK – Blue-chip stocks rose Tuesday after Federal Reserve Chairman Alan Greenspan offered remarks considered benign for stocks, while technology shares were hit by a Wall Street downgrade of semiconductor companies.
The Dow Jones industrial average (search) gained 12.58 points, or 0.12 percent, to end at 10,456.21 and the Standard & Poor's 500 index (search) edged up just 0.03 of a point, or 0.00 percent, to finish at 1,215.66. The Nasdaq Composite Index (search) dipped 5.04 points, or 0.24 percent, to close at 2,116.42.
The Philadelphia Stock Exchange Index of semiconductor shares declined more than 1 percent.
Boeing Co. (BA) shares climbed, adding to gains on the Dow. The stock has advanced more than 5 percent since the commercosite Index dipped 5.04 points, or 0.24 percent, to close at 2,116.42.
Greenspan told an economics conference that asset prices "invariably" fall after long periods of high risk-taking in markets, and a flexible economy is better able to withstand the inevitable blow.
"His speech was really focused on real estate. But then again if his comments cause some money to come out of the housing market and some money to come out of the credit market, where does it go? It probably goes into the equity market," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
He added that "maybe it's a bit of relief rally that he didn't say anything that controversial or that new."
San Francisco Federal Reserve Bank President Janet Yellen, in prepared remarks to members of Parliament in London, said the Fed must continue to uphold its promise of price stability by keeping inflation at bay.
"These were reassuring statements by the Fed," said Marc Pado, U.S. market strategist, Cantor Fitzgerald & Co. "I think what the market ultimately fears is inflation. What makes assets worth less in the long run is inflation. What the Fed is effectively saying is, 'We won't let prices get out of control."'
U.S. crude oil futures for November delivery ended down 75 cents at $65.07 a barrel as many refineries remained out of action following Hurricanes Rita and Katrina, curbing demand for crude feedstock.
The drop in oil prices breathed life into stocks that are sensitive to swings in fuel prices, including manufacturers like General Electric Co. (GE). GE shares rose more than 1 percent, or 37 cents, to $33.64 on the NYSE.
Earlier, a weaker-than-expected reading on consumer confidence hurt stocks. The Conference Board said its index of consumer sentiment plummeted to its lowest level in nearly two years, hit by economic fallout from Hurricane Katrina and soaring gasoline prices.
In the chip sector, Cypress shares fell 3.6 percent, or 52 cents, to $14.03, and Fairchild Semiconductor dropped 6 percent, or 92 cents, to $14.43, both on the NYSE.
Health insurer WellPoint Inc. (WPC) said it agreed to buy WellChoice Inc. (WC) for nearly $6.5 billion. WellPoint's shares slipped 0.1 percent, or 8 cents, to $75.01 on the NYSE, while WellChoice shares jumped almost 7 percent, or $4.91, to $75.51, also on the NYSE.
Trading was active, with about 1.50 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 1.65 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.
The number of declining stocks outpaced those advancing by about 9 to 7 on the New York Stock Exchange. On Nasdaq, decliners outnumbered advancers by 8 to 7.