NEW YORK -- A loud rip from Federal Reserve Chairman Alan Greenspan combined with a roaring burp from the U.S. Commerce Department sent waves of fear shuddering through stock markets Friday.
The Dow Jones Industrial Average, S&P 500 and the tech-suffused Nasdaq Composite Index each dropped almost 2 percent through the first four and half hours of trading.
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Tremors began Thursday evening when Greenspan addressed a conference sponsored by the Office of the Comptroller of the Currency. Sources report that Greenspan complained of severe gastric pains from a lavish dinner with Mexican and German trade representatives. "He looked sort of uncomfortable," one aide said. "Then again, I suppose he always does."
Apparently, indigestion put Greenspan in no mood for the leisurely pace his speeches normally take.
"One of the broad issues that you have been discussing today is the nature of financial risk," Greenspan began. "This evening I will offer my perspective."
Whereupon Greenspan stepped to the right of the podium, pirouetted until his back was to the audience of bankers, flung both arms out wide, expelled a 20-second flatus that rattled across the room, and immediately left the conference without further comment. Several bankers wrinkled their noses. "I thought his briefcase looked a little too thin this evening," one audience member said.
Investors immediately reacted to Greenspan's presentation. S&P futures slid in after-hours trading. Overseas, the Hang Seng, Nikkei, DAX and FTSE 100 indices all plunged.
"Clearly, the chairman is suggesting money managers haven't taken enough account of risk premiums," declared well-known commentator John Awl-Nohwing. "Greenspan doesn't see depth in the bull market."
Other observers saw inflation warnings. The length of the Fed Chairman's intestinal eruption and its lingering odor indicate Greenspan is prepared to push for higher interest rates, perhaps in incremental stages over the next several Fed meetings, said Susan Aumnishense, economist with a Washington, D.C. consulting firm.
"I think Greenspan is also saying he's worried about the recent weakening of the dollar," she said. "The Fed has to prop it up."
Ripple effects were magnified by Friday morning's report from the U.S. Commerce Department. The market expected to hear about a 0.5 percent increase in the Producer Price Index, but a news release released by the Commerce agency instead directed interested parties to a website URL featuring a reverberating belch.
Traders sold off blue chips stocks right at the opening bell, with the Dow plunging as much as 240 points in the first 30 minutes of trading. Rate-sensitive financial stocks led the rout.
"It's crazy down here," gasped one market maker's director of trading. "No one knows what to make of the PPI. It's a hell of a lot worse than anyone would've expected."
Some stocks defied the trend. Sun Microsystems (Nasdaq: SUNW), which on Thursday reported better-than-expected quarterly results, led a short list of heavily-traded gainers. That kind of performance from bellwether companies should override inflation concerns, several Wall Street observers said.
"Look, ultimately what matters is corporate performance," said fund manager Robert Weltheeman. "You can't worry about anything else. All Greenspan did was fart."