Stocks ended off their lows of the day but still were firmly in the red, after Federal Reserve chairman Greenspan put the kibosh on Wall Street's hopes for an intermeeting interest rate cut earlier today.
In a revision of the
Humphrey-Hawkins testimony that he gave to Congress earlier this month, Greenspan expressed more concern about the health of the economy, but not enough to warrant a reduction in the
fed funds rate before the Fed's next official meeting on Mar. 20.
Dow Jones Industrial Average, which soared 200 points Monday on speculation that the Fed might cut rates this week, has nearly reversed those gains. Losses in interest-rate sensitive stocks were particularly steep, as the
Philadelphia Stock Exchange/KBW Bank Index
, was off 1.5%, and
Morgan Stanley Cyclical Index
, down 0.6%, both fell on the news.
Nasdaq Composite Index, which also got a break earlier this week as talk of an interest-rate reduction brewed, ended at levels last seen in December 1998. Among the technology groups punished in late-day action were chipmakers, PC makers, networking-equipment companies and Internet names.
After warning that it expects revenue in its fiscal first quarter to drop 20% from fourth-quarter levels, specialty chipmaker
saw its ratings cut by the analyst community today. Both
trimmed their earnings estimates this morning. In recent action, Altera was down 1.1% to $23.13.
warned earnings and revenue in its fiscal second-quarter would fall below Wall Street's targets, sending its stock lower by a whopping 35.4% to $19.81.
Over on the
blue-chip index, the scene was bloody.
, down 2.6%,
, lower 5.7%,
, behind 2%, and
, off 3.1%, each took away more than 10 points from the Dow.
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Retail stocks traded lower in recent action, as rate-cut hopes were dashed earlier today. The
S&P Retail Index
was off 1.7%, with components
, lower by 4.7% to $42.50, and
, off 1.8% to $50.09.
Investors weren't even seeking shelter in the safety of gold -- a little profit-taking, perhaps? The
Philadelphia Stock Exchange Gold and Silver Index
was down 1.9%. The index lately has gotten a nice bounce off frightened investors fleeing to that which is usually the ultimate defensive.
Still, not all defensives were on the slide; drugmakers were doing fairly well. The
American Stock Exchange Pharmaceutical Index
was up 0.7%. Yesterday, component
, up 1.9% to $79.46, won approval from the
Food and Drug Administration
for its ever-popular depression medication, Prozac, to be administered in a weekly form.
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Treasuries were mixed as traders realize they will probably have to wait until late March for an interest-rate cut. The short-dated securities, which are more sensitive to revisions in short-term lending rates, were moving positively now after having slipped earlier this morning. The long bond was down slightly, while its yield has not changed much.
As noted above, Fed head Greenspan today updated his Feb. 13 testimony before Congress. Speaking to the
House Financial Services Committee
, he once again
expressed concern about the economy, reiterating that he expects a slow recovery and possibly more dips before the eventual pickup. Though his words clearly point to further rate-cutting, his remarks also snuffed out hopes that the Fed would move before its next scheduled meeting, on March 20.
The benchmark 10-year
Treasury note lately was up 10/32 to 100 21/32, lowering its yield to 4.914%.
In economic news, the revised reading of the
gross domestic product
), which measures the rate at which goods and services are produced in the nation, is at 1.1% for the fourth quarter of last year, its slowest growth since the second quarter of 1995, when it was 0.3% lower. Still, it is slightly above the 1.0% predicted by economists in the
Mortgage Applications Survey
) detected an increase in the purchase of new units, but a decrease in home refinancing.
For the week ended Friday, the purchase index rose to 291.4 from the previous week's 274.3. The refinancing index fell to 2140.4 from 2346.1. Greenspan mentioned the relatively strong showing in home
and automobile sales as a sign that some sections of the economy are holding steady.
Chicago Purchasing Managers' Index
chart) rose to 43.2 during February after falling to 40.2 for January. The gauge indicates a contraction in the manufacturing sector when below 50.
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