WASHINGTON -- Alan Greenspan, the Federal Reserve chairman, said Thursday that he views investors in the gyrating financial markets of the last few weeks as having been "groping" for the proper valuations of stocks, especially those of technology companies.
In an appearance on Capitol Hill, Greenspan also urged Congress and financial regulators not to overreact to technology-driven changes in the ways stocks are traded. And while he said nothing to suggest that the central bank will not continue to raise interest rates in coming months, he said he saw no signs that inflation is becoming embedded in the economy, despite the 1 percent rise reported today in the producer price index for March.Testifying before the Senate Banking Committee a day after the NASDAQ composite index officially entered a bear market, Greenspan suggested that the stock market's ups and downs have been the result not of rampant speculation, a herd mentality or even the Fed's own interest rate increases. Rather, he said, it reflected a natural effort on the part of investors to make sense of the ways in which technology is altering business and the economy.
He said the surge in technology stocks over the last few years had been driven by continually upgraded earnings estimates. From a regulatory perspective, Greenspan said, the government should let the marketplace work it out.