Stocks Slump Despite Greenspan Speech, Falling Oil Price

NEW YORK – Stocks slumped Wednesday as investors adopted a wait-and-see attitude despite crude oil's continued slide and Federal Reserve Chairman Alan Greenspan's (search) generally upbeat assessment of the economy.

The Dow Jones industrial average (search) closed down 29.43 points, or 0.28 percent, at 10,313.36. The Standard & Poor's 500 Index (search) fell 5.03 points, or 0.45 percent, to 1,116.27. The technology-laced Nasdaq Composite Index (search) ended down 7.92 points, or 0.43 percent, at 1,850.64.

Shares of Coca-Cola Co. (KO) weighed on the Dow and the S&P 500 indexes after Coca-Cola Enterprises Inc. (CCE), the world's largest bottler of Coke drinks, lowered its earnings forecast for the year.

While Greenspan said the economy has "regained some traction" after the summer's slowdown, investors looked past his congressional testimony, focusing instead on uncertainty about the health of the economy, third-quarter earnings pre-announcements and fiscal policy.

Greenspan gave no strong indications whether the Fed would raise interest rates at its meeting Sept. 21. While many analysts believe a quarter percentage point increase is likely, others wonder if election year politics will cause the Fed to skip a rate hike until November. The benchmark rate stands at 1.5 percent.

"Between the economy the way it is and the election coming up, I don't think the Fed will raise rates this month," said David Legeay, senior vice president at McDonald Financial Group. "It's still a show-me recovery, and a lot of businesses are waiting to see how the economy fares and what the Fed will do before they make any big investments."

Meanwhile, the Fed's beige book report showed the economy in many areas of the United States grew at a slower pace in late July and August as household spending softened.

Investors were not "back with full attention yet," said Jack Caffrey, equity strategist at JP Morgan Private Bank.

Wall Street has been quiet over the past few weeks as investors took vacations and avoided New York during the Republican party convention.

Since third-quarter earnings will likely be reduced due to the summer's high oil prices, the market has mostly discounted the upcoming earnings season — even though double digit profit growth is still likely — with hopes of a resurgence in profits in the fourth quarter to go along with the elections and, hopefully, more strength in the economy.

"Clearly, everyone wants to know what the catalyst is going to be to send this market higher," said Brian Belski, market strategist at Piper Jaffray. "One, we now have a lack of negative news of the kind that impacted the market over the summer. But more importantly, we've been increasingly conservative on earnings growth estimates, and those numbers will have to start going up if we're going to rally."

Despite his cautiously optimistic assessment, Greenspan echoed Wall Street's concerns over oil prices, which have fallen from record highs in recent weeks but stubbornly remain above $40 per barrel. A barrel of light crude for October delivery was quoted at $42.77, down 54 cents, on the New York Mercantile Exchange (search).

Coca-Cola fell $2.20, or nearly 5 percent, to $43.45. Coca-Cola Enterprises fell $1.11, or more than 5 percent, to $19.39. Coca-Cola is Coca-Cola Enterprises' largest shareholder.

But shares of McDonald's Corp.(MCD) climbed 12 cents, or 0.44 percent, to $27.50. It said worldwide sales at its namesake restaurants open more than a year rose 3.9 percent in August.

Shares of JetBlue Airways Corp. (JBLU) fell 78 cents, or more than 3 percent, to $22.29 after the low-cost carrier said third-quarter earnings would be lower than previous estimates because of disruptions from hurricanes Charley and Frances.

Casino operator Station Casinos Inc.'s (STN) stock rose $1.19, or almost 3 percent, to $47.79 after the company said third-quarter earnings would exceed its prior estimate, helped by stronger business at casinos open at least a year and a better Las Vegas economy.

Shares in Wal-Mart Stores (WMT) were down 21 cents at $53.08 after the retailer's chief executive told an investing conference that Christmas sales would likely meet expectations. .

Dean Foods Co. (DF) tumbled $6.73 to $30.40 after cutting its outlook for the quarter and the year.

McKesson Corp. (MCK) fell 15 percent, or $4.85, to $26.98, after the pharmaceutical distributor warned that its fiscal earnings for the quarter would fall short of recasts, due to fewer drug prices increases than expected.

Technology bellwether International Business Machines Corp. (IBM) rose 89 cents to $85.86, or more than 1 percent. Prudential Equity Group analyst Steven Fortuna said in a research note he thought IBM's sales were tracking ahead of average expectations for the third quarter.

After the closing bell, Texas Instruments Inc. (TXN), the largest maker of chips for cell phones, trimmed its quarterly revenue outlook. Shares closed regular trading up 12 cents at $18.83.

Trading was moderate, with 1.2 billion shares changing hands on the New York Stock Exchange, below the 1.4 billion daily average for last year. About 1.4 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.

Decliners outnumbered advancers on the NYSE and Nasdaq by about 3-to-2.

The Russell 2000 index of smaller companies was down 5.17, or 0.9 percent, at 557.76.

Overseas, Japan's Nikkei stock average closed down 0.2 percent. In Europe, France's CAC-40 fell 0.1 percent for the session, Britain's FTSE 100 closed down 0.2 and Germany's DAX index dropped 0.1 percent.

Reuters and The Associated Press contributed to this report.