Federal Reserve chairman Alan Greenspan said yesterday that the US economic expansion "has regained some traction" after a soft patch earlier this year. US stocks, however, weren't too impressed, and were mostly lower at yesterday's close.
The following comments from RealMoney editor Aaron Task are extracted from TheStreet.com:
Between Greenspan Lines Is Concern
Market participants and pundits rejoiced early Wednesday when Federal Reserve Chairman Alan Greenspan told Congress the economy has "regained some traction." But early gains receded amid a re-evaluation of Greenspan's comments and a less-than-robust beige book report from the Fed...
I don't want to make too much of one session (always dangerous): Trading volume remained subdued and declining stocks outpaced winners by a modest spread on both exchanges. Still, the message of the financial markets Wednesday was that Greenspan wasn't so upbeat about the economy after all, especially in conjunction with the beige book. Either that, or that Greenspan wasn't so upbeat about the economy, and yet he's still determined to raise interest rates, which isn't good news for the economy or equities.
The US economy has been finely poised for quite a while. Personally, I don't think Greenspan himself knows much more than other economists how the economy will perform going forward. As additional economic indicators become available, he will no doubt fine-tune his stance. I think investors buying or selling on his comments yesterday risk reading too much into them.
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