Mixed signals send
NEW YORK » Stocks stumbled yesterday as mixed economic news and further hints of higher interest rates from Federal Reserve Chairman Alan Greenspan kept buyers at bay.
The Fed chairman offered a modest endorsement of President Bush's idea of setting up private retirement accounts for younger workers in testimony before the House Financial Services Committee, but said that alone won't solve Social Security's long-term problems. Reiterating remarks made to a Senate panel Wednesday, Greenspan said the economy continues to expand at a respectable pace, and that inflation, while not an immediate threat, remains something policy-makers must guard against. There were few surprises in his comments, but analysts said they served as a reality check for investors.
"Greenspan is doing a good job of preparing American investors for what's ahead: We're in a period of rising interest rates and that's going to continue," said Thomas F. Lydon Jr., president of Global Trends Investments in Newport Beach, Calif. "He's done an excellent job of balancing the hikes, letting people know it's going to continue, and the market's done a good job of factoring that in. I don't think anything he's saying is shocking anybody."
The Dow Jones industrial average lost 80.62, or 0.74 percent, to 10,754.26, falling back into negative range for the year.
The broader gauges also posted declines. The Standard & Poor's 500 index was down 9.59, or 0.79 percent, at 1,200.75. The Nasdaq composite index shed 26.09, or 1.25 percent, to 2,061.34.
Analysts attributed the day's trading to a lack of certainty about the strength of the economy, the pace of inflation and how much higher interest rates will go. The prospect of higher rates and questions about how much they will slow down the economy is making many investors wary of taking big bets, said John P. Waterman, chief investment officer at Rittenhouse Asset Management.
Oil prices declined 79 cents to settle at $47.54 on the New York Mercantile Exchange as traders weighed OPEC's forecast of rising global demand against reports of increased U.S. crude inventories.
The dollar softened against the euro, gold prices rose and long Treasuries fell. The price of the 10-year note was down, while its yield rose to 4.19 percent, up from 4.16 percent late Wednesday.
Jobless claims were down for a third straight week, the Labor Department reported, as the number of laid-off workers filing for unemployment benefits dropped to the lowest level in more than four years. The decline surprised economists, who had forecast an increase.