By Jeff Sanford

(July 20 – 16:30 ET) – Call it the largest yo-yo the world has ever seen. Following comments by Federal Reserve Chairman Alan Greenspan that the economy is slowing, markets rocketed back to whence they came, reversing the downward trend of the last few days.

The TSE 300 composite index packed on a healthy 107.65 points to finish the day at 10,740.80.

The advance — and tell us if you’ve heard this story before — was led by the technology shares, Nortel in particular. The networking giant gained $1.85 over the day to close at a price $115.20. It was helped by news that main competitor, Lucent, may have a tough couple of quarters. Also on the upside were Celestica, Sierra Wireless, ATI, and Microcell, with Celestica putting on a particularly robust $18.75 to finish $106.45. Descartes Systems and C-Mac were also up.

JDS Uniphase took off on both sides of the border, pushed up by the rebounding techs, its inclusion in the S&P 500 and its addition to Goldman Sachs recommended list. It finished the day at $188.30, up an impressive $29.30.

Janna Systems was off 4%, after taking off yesterday on good earnings news.

Seven of the sub-indices were down on the day as investors shifted money into technology. Biggest on the upside was the industrial products subindex, up 2.36%.

The CDNX was also up on the day, putting on 22.41 points to finish at 3,378.07.

The Canadian dollar finished at US67.87¢., up slightly. The gain was credited to Greenspan’s comments and the Bank of Canada’s reputation for mimicking every move by the U.S. Fed.

The good news from Greenspan had a particularly strong impact on the U.S. markets. The NASDAQ rocketed up 128.93, the Dow 147.79 points, while the S&P 500 gained 13.61 points.

IBM had much to do with the Dow’s advance. Big Blue rose 13-1/2 to 117 on positive earnings news.

In his speech Greenspan credited stock market volatility, rising interest rates and surging oil prices for reducing the amount of money people have to spend, and hence, factors slowing growth. In his last speech he credited the reluctance by workers to ask for raises because of fears about job security for holding off inflation. Now it’s volatility, rising gas prices and interest rates. Thank goodness for 80¢ a litre or we’d be in recession.

Greenspan did say that he is worried about the tight labor market as he fears workers will soon be demanding wage and benefit increases, leading to higher consumer prices and inflation.

You know the economy can’t get much better. The normally taciturn economist even made a funny while describing the phenomenon.

“Should labor markets continue to tighten, short of repeal of the law of supply and demand, labor costs eventually would have to accelerate to levels threatening price stability and our continuing economic expansion,” said Greenspan.