Reverse Jawbone

December 5, 2000
Daniel Beighley

Reassuring words from Alan Greenspan suggesting a possible shift to neutral
in the Fed’s inflation bias helped spark a dramatic rally in stocks Tuesday that
propelled the Nasdaq up 10.5%, the Dow up 3.2%, and the S&P 500 up 3.9%. A
neutral inflation bias at the Dec. 19 Fed meeting could theoretically pave the
way for rate cuts as early as January.

Progress toward a resolution on the election front also helped put stocks in
the bullish mode. Coincidentally, the Dow managed to close back above its
200-day moving average for the first time in three weeks.

Nasdaq volume surged 33% above Monday’s level as 2.42 billion shares changed
hands. NYSE volume rose 30% above Monday’s level with 1.40 billion shares
trading.

In economic news, October factory orders fell by 3.3%, which was
significantly higher than the 1.6% decrease analysts expected. The news helped
support Greenspan’s view that the economy had slowed to reasonable levels.

“We have a combination of the perception that the Fed is done
tightening, and plus what seems to be a resolution in the Presidential election
all thrown together with an oversold condition in the Nasdaq, allowing a
levitating market,” said Dennis Jarrett, Chief Market Analyst, Jarrett
Investment Research.

“What we haven’t seen yet is a lot of the institutions participating.
The real key will be the next two days. That’s where we will have to see the
follow through,” he added.

According to preliminary numbers, the Nasdaq jumped 274.01 to 2889.76, the
Dow added 338.62 to 10,898.72, and the S&P 500 rose 51.58 to 1376.55.

Looking ahead, the third quarter productivity report will be released
Wednesday at 8:30 AM ET. Analysts expect a 3.5% rate of increase.

Reverse Jawbone

BUY THE FEAR, SELL THE GREED

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