Thursday July 22, 7:59 pm,,U.S. stocks end lower, bearish reading on Greenspan
By Cal Mankowski
NEW YORK, July 22 (Reuters) - Stocks ended lower on Thursday as Wall Street gave a bearish reading to Federal Reserve
Chairman Alan Greenspan's comments about the economy and the stock market.
The Dow Jones industrial average fell 33.56 points, or 0.31 percent, to 10,969.22.
In the broader market, declining issues beat advances 18 to 10 on active volume of more than 773 million shares on the New
York Stock Exchange.
The technology-laced Nasdaq Composite index posted its 11th largest point-loss in history, as it slumped 77.32 points, or 2.8
percent, to 2,684.45, due to a big drop in Internet stocks.
The Street.com index, a closely-watched gauge of Internet stocks, sank 6.20 points, or 5.8 percent, to 99.22.
In his semiannual testimony in Congress, Greenspan said the surge in stock prices could be overdone.
''We do know that a significant part of the rise in (stock) prices reflects rising expected earnings and a goodly part of that is a very major change in the view of where productivity is
going,'' Greenspan said.
''What we do not know is whether it is being overdone, or to what extent it is being overdone,'' he said.
Greenspan has repeatedly warned about the stock market's high valuation over the past few years. The most famous was in December 1996, when he questioned investors' ''irrational
exuberance'' as the Dow hovered at only 6,000.
As recently as last Friday, all of the major stock market indexes rocketed to new highs, with the Dow jumping to a record 11,209.84, propelled by strong corporate earnings.
The Fed chief also said the central bank would act ''promptly and forcefully'' if it saw evidence of rising inflation.
Greenspan signaled, however, that new interest rate rises were not imminent and noted inflation continued to be remarkably well-behaved.
The treasury market was also pressured, with the benchmark 30-year bond off 25/32, driving the yield up to 5.97 percent from 5.91 percent on Wednesday.
Marshall Acuff, strategist at Salomon Smith Barney, noted the early summer stock market rally was fueled to a large degree by the Fed's announcement in June that it had shifted
from a bias of tightening to a neutral stance.
''In his testimony today he (Greenspan) sort of left the door open that there could be another rate hike in August,'' Acuff said.
But the strategist added that another rate hike is not a ''foregone conclusion'' at this point.
''Greenspan's testimony raised more questions than perhaps were answered,'' said a trader who did not want to be identified.
Amazon.com Inc. (Nasdaq:AMZN - news) plunged 18-1/4 to 107-3/16 after after the online retailer said it expected even steeper losses despite rapidly growing revenue.
Late Wednesday, the Internet's biggest retailer reported a loss of $82.8 million, compared with a loss of $17 million a year earlier.
The selloff in Amazon undermined the Internet stocks.
America Online Inc. (NYSE:AOL - news) ended 5-12/16 lower at 110-7/16 even though it posted revenues and earnings that topped Wall Street forecasts.
Also, Morgan Stanley Dean Witter analyst Mary Meeker raised her per share earnings estimate for AOL for the fiscal years 2000 and 2001. Meeker said AOL's lineup of branded
product offerings is becoming more powerful, with 17.6 million paying subscribers.
Xerox Corp (NYSE:XRX - news) tumbled 4-6/16 to 50-13/16. The copier maker reported better-than-expected profits, but its revenues fell short of targets due to poor sales in Brazil
and Japan.
H.J. Heinz Co (NYSE:HNZ - news) slipped 3/4 to 49. The food giant agreed to sell its Weight Watchers business to Artal Luxembourg SA, a private European firm, for $735
million. Heinz is retaining ownership of the weight watchers food lines.
Quaker Oats Co (NYSE:OAT - news) fell 3-15/16 to 65-15/16. The food and beverage company reported income that beat analysts' estimates but it gave a cautious outlook for the
second half of the year.
Sears, Roebuck and Co (NYSE:S - news) was off 1-1/16 at 41-1/8. The company reported results that exceeding expectations, thanks to
a strong credit business.
Pet food maker Ralston Purina Co. (NYSE:RAL - news) edged up 4/16 to
30-5/16 after its profit rose by a better-than-expected 9 percent to $84.3 million. It said strong pet food sales more than offset weak results from its Eveready Battery Co. division.
Dow Chemical Co. (NYSE:DOW - news), the nation's No. 2 chemical company, gained 1-15/16 at 126-3/4. It posted lower second-quarter earnings but still surpassed Wall Street
expectations.
The Standard & Poor's composite index of 500 stocks fell 18.32 points to 1,360.97. The American Stock Exchange index was off 7.00 at 799.81.
The NYSE Composite index of all listed common stocks fell 5.70 to 641.78. The average share was down 40 cents.
The Wilshire Associates Equity Index -- the market value of NYSE, American and Nasdaq issues -- was 12,470.359 down 160.995 or 1.27 percent.
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