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To: rob108 who wrote (75542)	8/27/1999 12:24:00 PM
From: Jerry Miller	Read Replies (2) \| Respond to of 164684

U.S. Stocks Fall After Fed Chairman Greenspan Remarks on Earnings Reports By Deborah Stern New York, Aug. 27 (Bloomberg) -- U.S. stocks declined after Federal Reserve Chairman Alan Greenspan suggested distortions in accounting for corporate earnings make it difficult to determine how much to pay for shares. ``He's saying in the wake of (advances in) technology, we don't know exactly how to value assets,' said Larry Wachtel, market analyst at Prudential Securities. Stocks fell because ``you have a thin market, it's the last Friday in August, so you could swing a market based on anything,' especially comments by the chairman of the Fed. Software companies including Microsoft Corp. led the decline. Intel Corp. rose after an optimistic forecast from a Morgan Stanley Dean Witter & Co. analyst. The Dow Jones Industrial Average fell 30.72, or 0.3 percent, to 11,167.73 in late morning trading, erasing a 30-point gain. American Express Co. led the drop. The Standard & Poor's 500 Index dropped 5.84, or 0.4 percent, to 1356.178. The Nasdaq Composite Index declined 9.19, or 0.3 percent, to 2765.43. Seven stocks fell for every five that rose on the New York Stock Exchange. Greenspan's remarks were devoted to accounting issues: specifically, how changes in technology, the bull market and use of options as compensation are creating problems in reporting earnings. Investors rely partly on earnings to decide how much to pay for stocks. The comments came from the text of opening remarks to an annual conference of central bankers and economists in Jackson Hole, Wyoming. Greenspan said companies understated labor compensation by failing to account for the fair value of options -- a practice which added an unjustified 1 or 2 percentage points annually to profit growth during the past five years, he said. The bull market helped reported profits, too, by making it possible for companies to cut contributions to pension funds. Even so, he suggested it was ``reasonable to surmise' that reported earnings are probably understated because of the way companies account for software embedded in capital equipment. ``It does not seem likely, however, even should all of the appropriate accounting adjustments to earnings be made, that such adjustments can be the central explanation of the extraordinary increase in stock prices over the past five years,' he said.