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Rate wait hits Wall St.
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February 28, 2001: 5:13 p.m. ET
For investors, Greenspan once again seems too upbeat for comfort
By Staff Writer Jake Ulick
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NEW YORK (CNNfn) - U.S. stocks tumbled Wednesday after Federal Reserve Chairman Alan Greenspan signaled that interest rates may not fall any time soon.
Greenspan told a Congressional panel that the economy, though weak, may have improved. That disappointed investors who hoped a bleaker outlook from the powerful banker would force the immediate interest rate cut so craved on Wall Street.
"Greenspan's not panicking," said John Lonski, economist at Moody's Investors Service.
But some investors did, sending the Nasdaq composite index to its lowest level in more than 26 months. The Dow Jones industrial average tumbled nearly 150 points while the S&P 500 came within sight of what Wall Street deems a correction.
 Faced with growing job cuts and profit warnings from Corporate America, investors dealing with months of stock losses have placed their hopes on quick and deep rate cuts.
But the Fed chief gave a more sober assessment of the economy, suggesting he may wait until policymakers' March 20 meeting to lower borrowing costs for a third time this year.
"This testimony did not give the impression that he is in a great hurry to cut rates immediately," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The Nasdaq composite index shed 55.99 points, or 2.5 percent, to 2,151.83. The second straight loss handed the Nasdaq its lowest finish since Dec. 22, 1998, when the index closed at 2,120.98.
The Dow Jones industrial average fell 141.60, or 1.3 percent, to 10,495.28, while the S&P 500 lost 18, or 1.4 percent to 1,239.94.
From its peak above 1,500 last April, the S&P 500 is off 18.7 percent, putting it within sight of the 20 percent drop Wall Street considers a correction.
The major indexes finished February with losses. The Nasdaq tumbled 22.4 percent on the month while the Dow lost 3.6 percent and the S&P 500 declined 9.2 percent.
 More stocks fell than rose. Declining issues on the New York Stock Exchange topped advancing ones 1,671 to 1,391 on volume of more than 1.1 billion shares. Nasdaq losers beat winners 2,286 to 1,414 as 2 billion shares changed hands.
In other markets, the dollar rose against the yen but fell versus the euro. Treasury securities were flat.
Parsing testimony
The Fed chief's comments, while more pessimistic than his last public remarks, also showed balance. Greenspan predicted that the economy's slowdown "has yet to run its full course." But he said the problems may also prove "limited."
Greenspan also said signs of economic weakness were less evident in January and February. But he left people guessing about the timing of the Fed's next move.
In an unusual development, Greenspan's Wednesday testimony to the House Financial Services Committee differed slightly from his remarks two weeks ago to the Senate Banking Committee.
 Tony Crescenzi, an analyst at Miller Tabak & Co., calculated that Wednesday's prepared remarks contained 151 new words.
"Unfortunately for investors, today's speech contained no hint at the pre-meeting rate cut the markets are hoping for," said Crescenzi, who still does not rule out an inter-meeting move.
Since Greenspan spoke to a Senate panel two weeks ago, the economy may have weakened. Consumer confidence, orders for big-ticket items and sales of new homes all have fallen.
More bad news came Wednesday when the government said the U.S. gross domestic product expansion slowed to an annual rate of 1.1 percent during the final three months of last year, the weakest reading in 5-1/2 years.
Mike Moran, chief economist at Daiwa Securities, said the market was looking for a more dour speech from the Fed chief. Instead, he said, they got one that wasn't significantly different from Greenspan's remarks to the Senate.
"There was not enough to lead you to the belief that he was contemplating an easing between meetings," Moran said.
Questioning Greenspan, members of Congress tried with futility to pin down the Fed chief on rate cuts. But Greenspan didn't bite. Economists expect at least a quarter-percentage point reduction in borrowing costs when the Fed meets next month.
For investors, Greenspan's testimony Wednesday was as unsettling as the last one. On Feb. 13, he cast a surprisingly upbeat economic view, signaling that interest rate cuts wouldn't come quickly. In late January, the Fed cut rates for the second time in a month to keep the economy from slipping into recession.
Investors, hammered by a slowing economy and profit warnings, have kept the rate-cut vigil this week. Wayne Angell, a Bear Stearns economist and former Fed governor, helped spark that vigil by predicting a rate cut this week.
Stocks rose Monday on these hopes, but when no cut came Tuesday, stock selling picked up.
Altera declines
In the latest tech company with trouble unloading its wares, specialty chipmaker Altera (ALTR: Research, Estimates) said it expects sales for the quarter ending in March to come in roughly 20 percent below the $368 million it reported in the fourth quarter of 2000. Altera shares fell 25 cents to $23.13.
Avanex (AVNX: Research, Estimates) slipped $4.56 to $19.38 after the maker of photonic processors warned that third-quarter earnings per diluted share will comes in at 2-to-3 cents, below forecasts of 6 cents per share.
On the Nasdaq, Oracle (ORCL: Research, Estimates) lost $2.69 to $19 while JDS Uniphase (JDSU: Research, Estimates) declined $1.06 to $23.75. 
Among Dow issues, United Technologies (UTX: Research, Estimates) lost $1.74 to $77.91 while IBM (IBM: Research, Estimates) declined $2.69 to $99.90.
Investors seeking safety ran for cover in drug stocks. Johnson & Johnson (JNJ: Research, Estimates) rose $1.39 to $97.33 while Merck (MRK: Research, Estimates) gained 29 cents to $80.20.
But Amazon.com (AMZN: Research, Estimates) fell $1.56 to $10.19. Market rumors surfaced that the online retailer is in danger of bankruptcy. But the company denied the rumors. 
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