Weekly roller coaster ride
Equity prices were up and down this week as investors reacted to negative earnings reports as well as Greenspan's comments on the economy. While companies benefit from lower interest costs, hinted at by Greenspan, they benefit more from stronger revenue streams. The revenue streams are still running dry.

Greenspan sparks bond rally
The yield on the 30-year long bond closed at its lowest level for a Friday close since the first week of April. Two factors have pushed up the long end of the Treasury market these past few months. One is the fear that inflationary pressures will start percolating given the Fed's aggressive easing action since the beginning of the year. However, yields at the long end have also picked up because new and revised estimates of the federal budget reveal that the surplus may not be quite as large as estimated at the beginning of the year. Certainly as economic activity has moderated in the past year, individual and corporate tax receipts have declined. The downward direction in tax receipts should continue into the next year when consumers find that capital gains of the past few years turn into capital losses.

In any case, Treasury yields rallied on Greenspan's remarks that inflation remains under control and the risk remains negative on economic activity. Bond investors certainly prefer a declining rate environment - particularly with the reassurance that the inflation news is good.