The Dow Jones industrial average fell 55.03 points to close at 6,983.18, having recovered from a nearly 123-point afternoon tumble.
The Dow fell more than 101 points early in the session in reaction to a report to Congress by Greenspan. The blue-chip average had rebounded to a deficit of about 30 points near midday before sliding again.
Decliners led advancers by more than a 2-to-1 margin on the New York Stock Exchange, with 774 up, 1,811 down and 767 unchanged. NYSE volume was 566.22 million shares vs. 527.44 million yesterday.
Broad-market measures also took a beating.
The Standard & Poor's 500 list fell 6.41 to 805.67, and the NYSE's composite index fell 3.39 to 422.14. The Nasdaq composite fell 7.14 to 1,340.55, and the American Stock Exchange composite fell 2.68 to 597.31.
Greenspan refused to rule out an interest rate hike by the U.S. central bank to slow down the economy to control inflationary pressures, which he said could be exacerbated by the continuing run-up in stock prices.
Bond prices fell immediately after Greenspan's remarks, boosting the yield on the 30-year Treasury -- a key determinant of corporate and consumer borrowing costs -- as high as 6.80 percent, up from 6.66 percent late yesterday.