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Investor profit-taking
keeps stocks lower
NEW YORK >> Investors collected profits for a second straight day yesterday as Federal Reserve Chairman Alan Greenspan reiterated a mixed assessment of the economy. Analysts also attributed the market's pullback to earnings reports, saying that while most so far have been positive, the results haven't wowed investors.
Stocks built on losses from Tuesday when Greenspan cautioned in the first of two days of congressional testimony that deflation, an economically dangerous long-term slide in prices, is still a possibility. Greenspan also said the economy is poised for strong growth in the second half of the year, which, while a good thing, raised questions about whether interest rates are headed higher.
"People are concerned that if rates go up this sort of nascent (economic) recovery could be in jeopardy. It is not a major fear, but given the advances the market has made since March, the tendency to take profits is out there," said Richard A. Dickson, senior market strategist at Lowry's Research Reports in Palm Beach, Fla.
The Dow Jones industrial average closed down 34.38, or 0.4 percent, at 9,094.59, adding to Tuesday's loss of 48.18.
The Nasdaq composite index declined 5.24, or 0.3 percent, to 1,747.97. The Standard & Poor's 500 index fell 6.33, or 0.6 percent, to 994.09.
Declining issues outnumbered advancers slightly more than 2 to 1 on the New York Stock Exchange. Consolidated volume was heavy at 2.19 billion shares, ahead of Tuesday's already-hefty 2.03 billion.
The Russell 2000 index, the barometer of smaller company stocks, fell 3.25, or 0.7 percent, to 473.68. The NYSE composite index dropped 31.34 to 5,552.51. The American Stock Exchange composite index fell 11.81 to 947.20.
The Labor Department reported that consumer prices increased by a modest 0.2 percent in June. The advance in the Consumer Price Index, the government's closely watched gauge of inflation, followed a 0.3 percent decrease in April and flat prices in May.
The 0.2 percent rise matched analysts' forecasts and could alleviate concerns the economy might suffer deflation.
Analysts said quarterly earnings results, which companies began releasing in earnest this week, contributed to the market's two-day decline. Investors were hoping companies would raise third-quarter and yearly outlooks, and had already factored strong second-quarter profits into higher stock prices.
Earnings are mostly exceeding or meeting expectations, said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray, but not to the degree they did following the first quarter.
Since the lows made March 11, the Dow has gained nearly 21 percent, the Nasdaq has surged 37.5 percent and the S&P has advanced 24.2 percent.
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