NEW YORK-- The NASDAQ composite index soared to a record, leading a broad stock market rally that was extended Friday on Federal Reserve Chairman Alan Greenspan's suggestion that the Fed's two interest rate hikes this year seem to be keeping inflation under control.
The remarks raised hopes that the central bank may not see the need for repeated additional rate hikes to keep the economy from overheating. Interest rates tumbled on the inflation-sensitive government bond market.The Dow Jones industrial average rose 107.33 to close at 10,729.86, adding to its 227.64-point surge on Thursday. The Dow ended the week up 261.51 points, or 2.5 percent, adding to last week's 450-point advance.
Broader stock indicators were also higher. The NASDAQ composite index rose 91.21 to close at 2,966.43, well above the record close of 2,915.95 reached on Oct. 11. The Standard & Poor's 500 rose 20.49 to 1,362.93.
The rally on Wall Street came on the 70th anniversary of the 1929 stock market crash, when the Dow plunged 11.73 percent in a single session. October has been a tough month for stocks in the years since, with huge selloffs in both 1987 and 1997, and traders were glad to put the month behind them.
Optimism also was raised by remarks from Greenspan at a Florida meeting of business executives late Thursday, where he said a significant upturn in the growth of productivity in recent years has boosted the U.S. economy and kept inflationary pressures under control.
Greenspan also suggested that the Fed's two interest rate hikes this summer are keeping the economy on a path of noninflationary growth.
In recent weeks, the market has been dominated by a debate over whether the Fed will raise interest rates for the third time this year when its policy-makers meet on Nov. 16. Some traders had worried about prospects for more increases down the road.
Greenspan didn't say what the Fed will do. He also warned that the central bank will be particularly alert in the coming months to any signs of slowing productivity -- the amount of output per hour of work.
In addition, Greenspan suggested that he needs to see more evidence the economy is slowing in order to keep the central bank from raising interest rates again.
The government reported Thursday that economic activity was strong in the third quarter without signs of renewed inflation, figures that fueled the market's rally.
"We are in the midst of a big rally, and it should carry through over several more sessions," said Alan Ackerman, senior vice president at Fahnestock & Co. "But that doesn't mean that this is going to last. We still have a bunch of big hurdles ahead of us before the Fed's next meeting in November.
"Remember, the buyers are quick on the trigger, but so are the sellers."
Shares of Intel rose 51/4 to 77 7/16 on the NASDAQ Stock Market after the world's largest maker of computer chips said production this year will not be disrupted by the earthquake in Taiwan or the Year 2000 computer problem.
Intel's announcement late Thursday helped the rest of the chip industry. Applied Materials rose 6 1/16 to 89 13/16, and Sun Microsystems gained 7 3/16 to 105 13/16.
Lockheed Martin shares fell 2 15/16 to 20 after the defense conglomerate slashed its earnings estimate for the year 2000 and its president and chief operating officer, Peter B. Teets, announced his retirement, blaming himself for the earnings shortfall.
Shares of Akamai Technologies, a maker of technology used to boost the efficiency of the Internet, soared in an initial public offering. Akamai was priced at 26 per share, opened at 110, and closed at 145 3/16 on the NASDAQ, the fourth-biggest gain in history for a stock making its IPO.
Ricky Harrington, technical analyst at Wachovia Securities in Charlotte, N.C.,
One analyst noted that the technology sector dominated Friday's rally.
"The market does look impressive," he said. "But it has to find some other leadership beyond the techs and the financial stocks. When they're the only two groups driving the market, it doesn't signify a lot of strength."
One other bastion of strength Friday: Paper stocks, which benefited from positive comments from Merrill Lynch analysts. International Paper rose 4 3/16 to 52 5/8.
Advancing issues outnumbered decliners by an 11-to-5 margin on the New York Stock Exchange. NYSE volume was heavy at 1.37 billion shares, topping the robust 1.35 billion shares that changed hands Thursday.
The Russell 2000 index of smaller companies rose 5.82 to 428.63.
Overseas markets also were lifted by Wall Street's new strength.
Japan's Nikkei stock average rose 3.0 percent. Germany's DAX index gained 0.9 percent, Britain's FT-SE 100 rose 1.7 percent, and France's CAC-40 rose 3.0 percent.