Stocks slip despite
Greenspan’s remarks

NEW YORK >> Investors adopted a wait-and-see attitude on the economy, despite Federal Reserve Chairman Alan Greenspan's improved assessment, and bid stocks modestly lower yesterday as Wall Street waits for better economic and earnings news.

While Greenspan said the economy has "regained some traction" after the summer's slowdown, investors looked past his congressional testimony, focusing instead on uncertainty about the health of the economy, third-quarter earnings pre-announcements and fiscal policy.

Greenspan gave no strong indications whether the Fed would raise interest rates at its meeting Sept. 21. While many analysts believe a quarter percentage point increase is likely, others wonder if election year politics will cause the Fed to skip a rate hike until November. The benchmark rate stands at 1.5 percent.

"Between the economy the way it is and the election coming up, I don't think the Fed will raise rates this month," said David Legeay, senior vice president at McDonald Financial Group. "It's still a show-me recovery, and a lot of businesses are waiting to see how the economy fares and what the Fed will do before they make any big investments."

The Dow Jones industrial average fell 29.43, or 0.3 percent, to 10,313.36.

Broader stock indicators were also lower. The Standard & Poor's 500 index was down 5.03, or 0.4 percent, at 1,116.27, while the Nasdaq composite index dropped 7.92, or 0.4 percent, o 1,850.64.

With terror fears fading after the close of the political conventions and oil prices on the decline, investors are firmly focused on economic numbers, with an eye toward how the Fed will interpret the data when it looks at interest rates.

Since third-quarter earnings will likely be reduced due to the summer's high oil prices, the market has mostly discounted the upcoming earnings season -- even though double-digit profit growth is still likely -- with hopes of a resurgence in profits in the fourth quarter to go along with the elections and, hopefully, more strength in the economy.

"Clearly, everyone wants to know what the catalyst is going to be to send this market higher," said Brian Belski, market strategist at Piper Jaffray. "One, we now have a lack of negative news of the kind that impacted the market over the summer. But more importantly, we've been increasingly conservative on earnings growth estimates, and those numbers will have to start going up if we're going to rally."

Despite his cautiously optimistic assessment, Greenspan echoed Wall Street's concerns over oil prices, which have fallen from record highs in recent weeks but stubbornly remain above $40 per barrel. A barrel of light crude for October delivery was quoted at $42.77, down 54 cents, on the New York Mercantile Exchange.