A raft of good economic news couldn’t offset a buyers strike sparked by fears that important interest rates would soon move higher.
In the topsy-turvy world of Wall Street, good economic news, coupled with a happy Federal Reserve Chairman Alan Greenspan, spelled higher rates – and stocks sank anyway.
“The happier he feels, the more anxious people in the markets are,” Jim Glassman, senior economist at J.P. Morgan, said of Greenspan. “He’s the last person to get optimistic.” The Dow Jones industrial average lost 48.92, or 0.5 percent, to 10,525.37.
The broader indices also sank.
The Standard & Poor’s 500 index shaved 5.23, or 0.5 percent, to 1,157.54 and the tech-rich Nasdaq Composite index fell 8.77, or 0.5 percent to 1,881.63.
Markets started the day higher on the good economic news coming from a jump in productivity, a fall in new claims for unemployment and last week’s sudden 1.4 percent growth rate in gross domestic product.
Greenspan spoke in the Senate yesterday as part of his annual report to congress. Last week Greenspan spoke before the House, talking gingerly about a coming recovery.
But yesterday Greenspan said the recovery “was well under way,” and the sudden change in his usually dour tone startled markets. “It’s not what he said, but that he bothered to change his testimony seven days later. People are looking at that as something that could be a prelude to rate hikes later,” explained Glassman.