The market was bailing on the idea of an interest rate cut before the next official meeting of the Federal Reserve.
Since Friday, talk had made a
Fed move before March 20 seem likely -- at least much wished for. But Fed Chairman
Alan Greenspan's speech before the
House Finance Committee
this morning quashed that hope and sent the major stock market indices tumbling.
Light volume yesterday indicated there was money on the sidelines waiting to see what the Big Al might say today, but also waiting for some kind of positive news to entice them back into action. While Greenspan expressed greater concern about the economy than he did in a similar speech two weeks ago, his words did not suggest an intermeeting cut was at hand.
Dow Jones Industrial Average and the
Nasdaq Composite Index were lately both at session lows, with nothing in the ether to put a fire in investors' bellies. The Nasdaq keeps hitting new lows. And investors are being feed more negative earnings news and crummy research notes.
Take the can't-seem-to-stay-out-of-trouble chipmakers.
was the object of scorn today thanks to a
warning it put out after the close on Tuesday. It saw
come out with scissors to
cut earnings estimates. Altera was off 2.4%.
Altera's fallout hit
, which also got socked with an estimate
cut by Lehman. It lately was down 3.6%.
created its own
problems when it came out with an earnings warning for its second quarter, citing weakening demand in the PC industry. The stock was tanking, lately off 30.5%.
The Dow's bad day was being fed by a mixed bag of detractors.
were each taking 10 or more points away from the blue-chip index.
announced a deal with another
. The two will
pair up to jointly market "innovative and nutritious" children's beverages under the Disney brand. Last week, the software giant announced that it and
Procter & Gamble
would start a
stand-alone company to sell their juices, juice-based drinks and snacks. Coke was 0.9% higher, while Disney was up 0.3%.
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Investors weren't even seeking shelter in the safety of gold. The
Philadelphia Stock Exchange Gold and Silver Index
was dropping 3.3%. The index lately has gotten a nice bounce from frightened investors fleeing to the ultimate defensive.
Still, not all defensives were on the slide. Drugmakers were doing fairly well. The
American Stock Exchange Pharmaceutical Index
was rising 1%.
yesterday won approval from the
Food and Drug Administration
for its ever-popular depression treatment Prozac to be administered in a weekly form. It was up 1.9% today.
With hope fading for an intermeeting cut, financials were getting slaughtered in recent action. The
American Stock Exchange Broker/Dealer Index
was 3.5% lower and the
Philadelphia Stock Exchange/KBW Bank Index
was down 2.4%.
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Treasuries are mixed as traders realize they will probably have to wait until later in March for an interest rate cut. The short-dated securities, which are more sensitive to revisions in short-term lending rates, are moving positively now after having slipped earlier this morning. The long bond is down slightly, while its yield has not changed much.
Federal Reserve chairman
Alan 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 3/32 to 14/32, lowering its yield to 4.944%.
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 Feb. 23, the purchase index rose to 291.4 from the 274.3 in the previous week. 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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