Skeptical investors sent stock prices falling
Tuesday despite hints of future interest rate cuts and a retail
sales report that suggested the economy isn't as weak as Wall
Street has feared.
The market suffered a letdown after congressional testimony from
Federal Reserve Chairman Alan Greenspan, who appeared to advocate a
smaller interest rate reduction than investors want or have
anticipated. Wall Street is worried that smaller cuts will take
longer to reinvigorate the economy.
"That's sort of disappointing the markets," said Hugh Johnson,
chief investment officer for First Albany Corp.
The Dow Jones industrial average fell 43.45 to close at
10,903.32, according to preliminary calculations.
Broader market indicators also finished lower. The Nasdaq
composite index dropped 61.93 to 2,427.73, while the Standard and
Poor's 500 index ended down 11.51 at 1,318.80.
The market saw Greenspan's testimony as a sign to sell and lock
in recent profits. Investors had been expecting the Fed, which in
January twice dropped rates a half point, to lower rates by another
half point in March.
"Investors are just a little less convinced that we are going
to get the (economic) recovery that he is forecasting," Johnson
said.
While Greenspan, who testified before the Senate Banking,
Housing and Urban Affairs Committee, said he believes the economy
will improve in the second half of the year, investors are less
sure, Johnson said.
"If the markets saw a recovery in the economy and earnings
coming, we would have strong markets today," Johnson said.
A positive sign for the economy came earlier from the Commerce
Department's report that retail sales rose 0.7 percent during
January, slightly ahead of analysts expectations and the biggest
jump in four months. Consumers spent on a wide variety of goods,
from cars to clothes to building supplies.
The retail report "was an important piece of evidence to show
the economy is not spiraling down into a recession," said Charles
H. Blood Jr., senior financial markets analyst at Brown Brothers
Harriman & Co.
The increase in consumer spending drew investors back toward
some retailers including Gap, up 72 cents at $28.73 and Home Depot,
which rose 58 cents to $46.31.
But other blue chips fell as the retail spending news couldn't
compensate for investors' disappointment over Greenspan's testimony
and fears about the anemic economy. Citigroup was down 86 cents at
$54.59, and Coca-Cola lost 86 cents to trade at $59.96.
Most analysts expect lower borrowing costs to boost economic
growth in the second half of the year, especially in the
long-battered tech sector.
Still, tech stocks were mostly lower. Intel lost $2.06 to close
at $32.50, and Microsoft fell 55 cents to $58.20. But
Hewlett-Packard rose 74 cents to $33.34.
Advancing narrowly outnumbered decliners 16 to 15 on the New
York Stock Exchange. Volume was 1.06 billion shares, compared with
1.01 billion at the same point Monday.
The Russell 2000 index finished down 2.78 at 502.57.
Stocks closed lower in overseas trading. Japan's Nikkei index
fell 1.1 percent, Britain's FT-SE 100 index slipped 0.2 percent,
Germany's lost 0.1 percent and France's CAC-40 index declined 0.4
percent.
