Stocks Mixed After Greenspan's Words

July 16, 2002
By AMY BALDWIN

NEW YORK (AP) - Positive assessments of the economy by Federal Reserve Chairman Alan Greenspan assuaged investors on Tuesday, allowing the market to recover from sharp early losses.

The Dow Jones industrials suffered a moderate loss, climbing back from a drop of more than 230, while the tech sector put together a respectable advance.

Investors remained somewhat anxious after eight weeks of selling, and one day after the market was wracked by huge price swings. The Dow fell as much as 439 points late Monday afternoon before recovering to a loss of 45 by the close.

But investors were soothed by Federal Reserve Chairman Alan Greenspan, who 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.

In late morning trading, the Dow Jones industrial average was down 60.85, or 0.7 percent, at 8,578.34, recovering from an earlier loss of 232. The Dow has fallen 740.31 points over the past six sessions. Four of the past six sessions have been marked by triple-digit drops.

The broader market was mixed. The Nasdaq composite index rose 16.37, or 1.2 percent, to 1,398.99.

The Standard & Poor's 500 index fell 3.31, or 0.4 percent, to 914.62.

The market shaved its losses after Greenspan began his testimony, and focused on other positive economic news. The Fed reported that industrial production increased by 0.8 percent in June, the sixth consecutive monthly gain.

The economic assessments heartened investors who have been worried about companies' second-quarter earnings and outlooks for the remainder of the year. But investors still played it safe in Tuesday's dealings, mindful of a litany of corporate bookkeeping scandals.

"It is an emotional market," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.

Among gainers, Johnson & Johnson rose $2.27 to $51.27 on second-quarter earnings that exceeded analysts' expectations by 2 cents a share.

Intel, due to release earnings later in the day, rose 15 cents to $19.27.

But General Motors fell $1.02 to $46.90 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.

Declining issues led advancers slightly more than 2 to 1 on the New York Stock Exchange. Volume came to 506.52 million shares, ahead of 482.03 million at the same point Monday.

The Russell 2000 index, which tracks smaller company stocks, rose 1.67, or 0.4 percent, to 410.75.

Overseas, markets were lower Tuesday with Japan's Nikkei stock average closing down 1.2 percent. In afternoon trading in Europe, France's CAC-40 declined 1.7 percent, Britain's FTSE 100 fell 1.6 percent, and Germany's DAX index was down 0.7 percent.