Dow Does An Old-Fashioned Greenspan Dance

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The Greenspan factor is back.

All this NASDAQ tech talk about bottoms, sectors and valuation bubbles hasn't meant much to Dow investors lately, who have tended to save their big reactions for top-of-the-fold items that, say, a Fed chairman might worry about.

Like the GDP. The Dow ran up 210 points on the simple news that in the third quarter, the economy cooled much faster than anybody expected, notching a 2.7 percent annual growth rate, the lowest since spring 1999. That's down from the torrid 5.6 percent in the second quarter and almost a full percentage point lower than what analysts had expected. For a change, it was the kind of surprise they like.

You know the calculus by now. A slowing economy is just what Greenspan wanted, because it keeps inflation at bay. And that means in December, with a suspenseful spring ahead, Uncle Alan will probably spare the markets another interest-rate hike. Which means cheaper money, more corporate investment — the whole bag of tricks that these markets love so well.

Greenspan may even cut by a quarter point, which brings us to the flip side of the equation. What if the "soft landing" is a skidding halt? The markets, having just gotten hard evidence of the slowdown they've been waiting for, may find that next week is an excellent time for those doubts to start cropping up. What's ailing the markets these days is uncertainty — over oil prices, the Middle East, the election, you name it. After November, oil prices, with their power to cause not only stagnation but also inflation and political meddling, will likely be the closest-watched indicator of the winter.

By Alan Greenspan too.