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Losses on Wall Street
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July 22, 1999: 5:11 p.m. ET
Greenspan talk of Fed readiness to raise interest rates triggers selling
By Staff Writers Malina Poshtova Zang and Robert Scott Martin
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NEW YORK (CNNfn) - Wall Street suffered another day of stock market losses Thursday, this time caused by a cautionary speech from Federal Reserve Chairman Alan Greenspan, who warned investors the Fed is ready to raise interest rates any time it feels inflation is a threat.
In his semi-annual Humphrey-Hawkins testimony before Congress, Greenspan said the Fed remains "especially alert" to inflation risks and will act "promptly" and "forcefully" to raise interest rates to combat any sign of renewed inflation in the U.S. economy. Even though Greenspan did not give firm confirmation that higher interest rates lie ahead, the news spooked investors who had hoped to have seen the last of rate hikes for a while.
The Dow Jones industrial average backtracked 33.56 points to 10,969.22. On the New York Stock Exchange, trading volume reached 777 million shares, with losers far ahead of gainers by 1,816 to 1,070.
The Nasdaq composite index plunged 77.33 points, or 2.8 percent, to 2,684.44, and the S&P 500 fell 18.32, or 1.3 percent, to 1,360.97.
The bond market also tumbled on the Fed chief's stern tone. The bellwether 30-year Treasury bond fell 26/32 of a point in price, for a yield of 5.96 percent, up from 5.90 percent at the market close Wednesday.
The dollar sank against the euro and recoiled nearly two full yen in value against the Japanese currency as speculators overcame fears the Bank of Japan would come in again to support the battered greenback.
Jitters for Nets, techs
Although digesting Greenspan's comments occupied many investors, the underlying cadence of earnings reports went on, contributing to the market action.
This time the focus was on the Internet sector, in which two of the Web leaders, America Online and Amazon.com, reported their bottom lines late Wednesday. And both suffered drops in their stock prices a day later.
Shares of Amazon.com (AMZN), one of the Internet's leading retailers, tumbled 18-7/16, or nearly 15 percent, to 107. The company said its second-quarter loss grew to 51 cents a share from 12 cents a year earlier even though revenue tripled in the latest quarter. Amazon's results were in line with market expectations, but analysts showed signs of concern that the company's continued heavy investment in new ventures could hurt revenues and delay a possible turn to profitability.
Shares of America Online (AOL) dropped 4-7/16 to 110-5/8. The world's largest online service provider beat market forecasts by reporting fiscal fourth-quarter earnings of 13 cents a share, up from 5 cents a share a year earlier. The company's per share profit topped estimates by two pennies.
Meanwhile, investors continued to cool off toward the technology sector, pushing shares of most high-tech leaders back into negative territory.
Microsoft (MSFT) dropped 3-5/8 to 91-1/16 and Dow tech leader IBM (IBM) fell 5-1/8 to 123-7/8. Fellow Dow component Hewlett Packard (HWP) plummeted 7-5/16 to 105-1/4, Dell Computer (DELL) shed 1-5/8 to 39-5/8, Intel (INTC) retreated 1-11/16 to 63-7/8 and Cisco Systems (CSCO) lost 1-15/16 to 61-1/8.
Shares of computer maker Gateway (GTW) fell 2-3/4 to 63 amid the broad technological retreat. The company, one of market leader Dell's chief rivals, was set to report second-quarter earnings after the bell Thursday. On average, analysts expect to see a profit of 55 cents per share.
Numb to earnings
Investors rewarded Dow Chemical (DOW) after the company's latest results, even though lower than a year earlier, still beat expectations amid rising productivity and improving product mix. Shares of the company were among the session's scattered winners, rising 2 to 127.
But Wall Street turned a blind eye to soaring profits from Finnish mobile-communications firm Nokia (NOK), dragging its American depositary receipts down 8-1/4 to 86-3/8. Nokia's bottom line surged 61 percent to 51 cents per share, beating estimates but still falling short of analysts' most bullish profit-growth forecasts of as much as 85 percent.
Elsewhere in the telephone sector, Sprint (FON) shares lost 1-9/16 to 51-5/8 after that company's second quarter came in right on market expectations, while shares of wireless unit Sprint PCS (PCS) fell 2-9/16 to 55-7/16 in concert.
Finally, shares of Xerox (XRX) got a cold shoulder, tumbling 4-9/16 to 50-13/16 after the imaging company warned that unsteady market conditions overseas could bite into its earnings for the rest of the year. Xerox reported a profit of 62 cents per share in the second quarter, matching forecasts.
(Click here for a look at today's list of CNNfn market movers.)
(Click here for a look at today's CNNfn technology stocks report.)
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