Anticipation...
Less than stellar earnings played a key role this week in maintaining the sluggish share price performance in the technology front. Some equity market players were heartened that Greenspan's comments seemed consistent with a 50 basis point rate cut in the federal funds target. Negative psychology had held back the equity market going into Greenspan's testimony as many portfolio managers reconciled themselves to a 25 basis point cut -- only hoping for a 50 point move. Throughout the week, though, it was fundamental weakness in earnings that dampened equities.

The Dow Jones Industrial Average posted a drop on Friday, but managed to end the week higher. The NASDAQ composite index declined on Thursday, but recuperated on Friday to close on a higher level than a week ago.

The S&P 500 as well as the Russell 2000 managed to close up Friday from a week ago. Incidentally, both indices are marginally higher than year-end.

Treasuries didn't like Greenspan's tax cut endorsement
Bond investors pondered the question of a Fed rate reduction at next week's FOMC meeting. While market players seemed to be evenly divided between 25 and 50 basis points, they also seemed worried that the larger cut had the potential to trigger greater inflationary pressures. Bond investors initially read Greenspan's endorsement of a federal tax cut in a negative light. Basically, if the budget surplus didn't proceed on schedule over the next few years, it would have different implications for the supply of long- and short-term Treasury securities coming to market. Treasury yields did pop up on the written testimony (meaning prices declined) but dipped back after Greenspan noted that economic growth was close to zero. Treasury markets were at cross currents given the short-term situation of slower economic growth (with recession potential) and long term issues of debt reduction. By week's end, market players seemed to come to the conclusion that a 50 basis point reduction in the federal funds rate was the most likely event next week. But there appeared less certainty in the markets than usual.