Stock markets slip after Fed chairman suggests rate hikes could come faster if needed.
June 8, 2004: 10:14 AM EDT
NEW YORK (CNN/Money) - Comments made by Alan Greenspan that the Fed could speed up the rate tightening cycle if it sees enough signs of inflation added to Wall Street's concerns over the rising cost of oil and the state of the tech sector recovery, and sent U.S. stock markets lower Tuesday morning.
About 40 minutes into the trading session, the Dow Jones industrial average (down 30.23 to 10360.85, Charts), the Standard & Poor's 500 (down 4.18 to 1136.24, Charts) index and the Nasdaq composite (down 9.20 to 2011.42, Charts) all posted losses. A bit of profit taking after two straight sessions of gains also added to the decline.
Speaking via video link to the International Monetary Conference in London, Alan Greenspan said the Federal Reserve is prepared to alter rates at whatever pace necessary to maintain stability. (For more details, click here.)
Greenspan is also due to speak Thursday at his Senate nomination hearing. While his comments this week are not expected to differ much from other recent comments, they will be scrutinized particularly closely for hints about what the Fed may do at the conclusion of the June 29-30 meeting.
Currently, the Fed Funds futures contract is pricing in a 100 percent chance of the Fed raising rates by a quarter-percentage point at the meeting.
Several sessions of weaker oil prices had pushed worries about the commodity out of the limelight. But those worries returned Tuesday, with crude prices rising on news of a strike in Nigeria and more disruptions to Iraqi oil exports. NYMEX light sweet crude oil futures rose 14 cents to $38.80 a barrel.
Market participants worry that if oil prices keep climbing, that would impact consumer spending, which has fueled the economic recovery.
Among stock movers, shares of Texas Instruments (TXN: down $0.49 to $25.74, Research, Estimates) fell after the chipmaker issued a mid-quarter update late Monday that was bullish -- but perhaps not as bullish as some analysts hoped. The company narrowed its earnings forecast to the higher end of its previous range. Analysts may have been hoping the company would raise the range.
Take-Two Interactive Software (TTWO: down $1.30 to $28.97, Research, Estimates) shares lost more than 4 percent after the video game publisher reported a steeper-than-expected loss, and cut its forecast for the quarter and the year due to weak game sales and changes to its release schedule.
Market breadth was negative and volume was light, with seven stocks falling for every three that rose both on the Nasdaq and the New York Stock Exchange. Some 162 million shares traded on the NYSE and about 265 million shares changed hands on the Nasdaq
Treasury prices fell after Greenspan's remarks, pushing the 10-year note yield up to 4.80 percent from 4.76 percent late Monday. Bond prices and yields move in opposite directions. The dollar was mixed versus the yen and higher versus the euro.
In international trade, Asian markets closed higher Tuesday, while European markets were mostly lower in the afternoon.
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