Financial markets across the board rallied on Tuesday as Federal Reserve Chairman Alan Greenspan delivered comments that investors interpreted as signaling the Fed is less worried about inflation.

Mr. Greenspan said in a speech to America's Community Bankers that "the pace of expansion of economic activity has moderated appreciably, in part as tighter financial conditions have had some impact on interest-sensitive areas of the economy," such as home building, vehicle sales, and demand for consumer durable goods.

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