Stocks drop despite
upbeat Fed chair

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By Amy Baldwin
Associated Press

NEW YORK >> Wall Street wobbled again today, dropping sharply at the opening, stabilizing on soothing words from Federal Reserve Chairman Alan Greenspan and then falling sharply again in late afternoon amid investors' continuing anxiety about the market's own dynamics.

The Dow Jones industrials closed its seventh straight losing session down more than 160 points, a slight improvement over an earlier loss of 232, while the tech sector gave up a respectable gain and also finished lower. Declining issues led advancers 4 to 3 on the New York Stock Exchange.

"People are just fed up. ... It is a very emotional market," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.

Investors remained nervous after eight weeks of heavy selling, including big price swings yesterday, when the Dow fell as 439 before recovering to a loss of 45 by the close.

The Dow finished today down 166.08, or 1.9 percent, at 8,473.11. The Dow has fallen more than 900 points in seven straight losing sessions, four of which have been marked by triple-digit drops. The last time the Dow had a longer unbroken losing stretch was the eight days that ended Sept. 21, following the Sept. 11 attacks.

The market's broader indicators also stumbled lower. The tech-heavy Nasdaq composite index slipped 7.36, or 0.5 percent, to 1,375.26. The Standard & Poor's 500 index fell 16.99, or 1.9 percent, to 900.94. The Russell 2000 index fell 1.81, or 0.4 percent, to 407.27.

The price of the Treasury's 10-year note was down 7/16 point today, while its yield rose to 4.69 percent from 4.62 percent late yesterday. Two-year Treasury notes were down 1/8 point and yielded 2.61 percent, up from 2.54 percent yesterday.

Greenspan told the Senate Banking Committee the economy is on its way to full recovery, although it will keep feeling the effects of last year's recession. Greenspan also said the Fed will not start raising interest rates until the economy shows further strengthening.

It long has been said that Greenspan is one of the most powerful men in Washington, able to move markets with a single statement.

Just how much so was noted by senators today.

When Greenspan began testifying before the Senate Banking Committee about the economic outlook for the nation, the Dow Jones Industrial Average was down 200 points, noted the committee chairman, Sen. Paul Sarbanes, D-Md... By the end of Greenspan's prepared testimony, the Dow had recovered somewhat and was down 132.

Could he do more magic?

"Mr. Chairman, can you let him continue his statement?" Sen. Richard Shelby, R-Ala., asked, to laughter in the room.

"I invite members to yield back their time and we'll give it to Chairman Greenspan to continue," Sarbanes said.

But investors were still mindful of their concerns about earnings and a series of corporate bookkeeping scandals, and they were unable to overcome their case of nerves as the afternoon wore on. Such worries have led to eight straight losing weeks. At this point, Wall Street's huge losses are themselves helping to drive stocks lower, analysts said.

The market "tends to feed on itself on the downside just as it fed on itself on the upside for seven years," Hyman said.

Caterpillar dropped $2.19 to $43 after its second-quarter earnings missed analysts' forecast by 15 cents a share.

And, General Motors fell $2.08 to $45.84 despite posting second-quarter earnings that were 21 cents a share higher than analysts were expecting. GM added to losses from last week when several brokerages downgraded the stock, citing among their reasons concerns about the company's ability to fund its pension plan.

Intel declined 76 cents to $18.36 ahead of its earnings. After the market closed, the chip maker reported results that missed analysts expectations by 4 cents a share, and its stock fell an additional 19 cents in the extended trading session.

But Johnson & Johnson rose $1.10 to $50.10 on second-quarter earnings that exceeded analysts' expectations by 2 cents a share.

While companies are reporting second-quarter earnings in line with or above analyst expectations, the numbers so far haven't been enough to shake the market out of its slump.

Overseas, markets were mixed. Japan's Nikkei stock average closed down 1.2 percent. In Europe, France's CAC-40 slipped 0.2 percent, while Britain's FTSE 100 rose 0.7 percent, and Germany's DAX index climbed 1.7 percent.