NEW YORK – Stocks dropped on Wednesday after downbeat forecasts from marquee corporate names and Federal Reserve Chairman Alan Greenspan's worrisome comments on the economic outlook..
In testimony to Congress, Greenspan warned that the year-long economic slowdown hasn't ended and added that the Fed may have to cut interest rates again in its bid to revive economic growth.
In his twice-a-year report on the economy, Greenspan told Congress: "We are not free of the risk that economic weakness will be greater than currently anticipated."
The Dow Jones industrial average lost 36.56 points to end the day at 10,569.83 -- a good recovery from its earlier loss of 122 points. The technology-dominated Nasdaq Composite Index dropped 51.15 points at 2,016.17, after diving more than 3 percent at mid-afternoon.
The broader Standard & Poor's 500 Index lost 6.73 points to 1,207.71.
``What the market needs now is better economic news and Greenspan's not suggesting that's coming. Greenspan is just saying things are not as negative,'' said Tony Dwyer, chief market strategist at Kirlin Securities. ``There is a malaise in the market. It's not like the market is getting pounded. There are just no buyers and no catalysts to bring them in.''
Just a day ago, investors had looked past dreary quarterly earnings reports and focused on upbeat forecasts instead as some companies weak results still met or beat estimates.
But the party was spoiled by a host of companies, particularly from the high-tech sector, that reported dismal quarterly results and bleak corporate outlooks.
Computer chip giant Intel Corp. and software provider Veritas Software both unleashed pessimistic forecasts, while financial services behemoth American Express Co. slammed the Street with news of massive layoffs.
EMC Corp., the No. 1 data-storage systems maker), said its profits could take an even bigger hit in the current quarter than the second quarter's 75-percent drop. The company also said the speed and depth of deterioration in the global economy has hurt its ability to make a near-term forecast. EMC shares fell to a 52-week low of $18.15.
Intel fell $1.28 to $28.62 after it reported profits sank 76 percent as the world's largest semiconductor maker was hit by a slowing economy, slack PC sales and a stinging price war.
Hit hard was Apple Computer, down $4.27 at $20.83, after the computer maker raised the possibility that revenue for the second half of its fiscal year could fall short of its earlier forecast.
Veritas met the Street's earnings estimate, but cut its annual growth target amid a prolonged slump in U.S. corporate technology spending. Investors were shocked by the warning, which came just 12 days after company executives reiterated previous guidance. Shares sank a whopping $13.78 to $36.64 and sector companies were hit, including Siebel Systems, down $6.80 at $36.77. Siebel reports later on Wednesday.
``You're waiting for the turn for so long and want to believe it's coming, and just when you start to get some evidence it is, you get contrary evidence -- it wears on the psychology and the psyche of investors,'' said Charles White, president of investment firm Avatar Associates.
About half of the Dow's 30 components will issue their results this week, among them a report from high-tech heavyweight International Business Machines Corp., due after Wednesday's close. IBM slid $4.73 to $103.80.
So far, more than a quarter of the companies in the S&P 500 have reported earnings. Of those 144 companies, 63 percent have come in above expectations, 25 percent have met forecasts, and 12 percent have disappointed, according to Thomson Financial/First Call.
The June Consumer Price Index, a reading of retail-level inflation, climbed by a seasonally adjusted 0.2 percent in June. The index was up 3.8 percent for the year. The core CPI, excluding volatile food and energy components, rose 0.3 percent in June compared with just 0.1 percent in May.
One part of the economy that has held up well is housing. A separate report by the Commerce Department indicates that sector remains strong.
Housing construction rose 3 percent in June to a seasonally adjusted annual rate of 1.66 million. That followed a revised 1 percent decline in May.
Declining issues outnumbered advancers about 4 to 3 on the New York Stock Exchange. Volume came to 995.25 million shares, ahead of the 928.16 million traded at the same point Tuesday.
The Russell 2000 index, which measures the performance of smaller company stocks, fell 6.14 to 484.43.
Overseas markets were lower Wednesday. Japan's Nikkei stock average finished down 2.0 percent. In Europe, Germany's DAX index fell 2.0 percent, France's CAC-40 dropped 2.2 percent, and Britain's FT-SE 100 declined 0.4 percent.
-- Reuters and the Associated Press contributed to this report.