Why You Can Trust CNET Markets decline on Greenspan warning
The Dow slumps at the close while the Nasdaq tumbles on declining technology stocks amid concern that Federal Reserve chairman Alan Greenspan may consider hiking interest rates.
The Dow Jones Industrial Average cut losses in late trading, slumping 8.59 points to 10,946. The tech-heavy Nasdaq Composite Index, which edged up at the open, tumbled in the afternoon to finish down 62.09 points at 2,472.
As reported, Microsoft today said it will invest $5 billion in AT&T and announced a series of agreements with the phone giant in a move expected to boost its position in Internet services. Microsoft shares fell 1.18 to 77.93.
Yesterday, cable operator Comcast said it wouldn't try to counter-offer AT&T's $54 billion cash-and-stock offer for MediaOne.
Ma Bell shares climbed 8.2 percent to finish ahead 4.68 at 61.62. Comcast fell 0.06 to 36.68, and MediaOne rose 2.25 to 79.12 at the market close.
Other communications and cable stocks continued to trade weaker in the afternoon. Phone company MCI WorldCom lost 5 points to 84.62, Bell Atlantic fell 2.5 to 55.87, and US West fell 0.06 to 54.68. Sprint, which flip-flopped most of the trading day, ended 2.06 higher at 107.5. Cable operator Cox Communications rose 1.62 to 80.62.
Separately, at the Federal Reserve Bank of Chicago's annual banking conference this morning, federal chair Alan Greenspan said the market's rise would be threatened if a tight labor market drives up wage costs and inflation, forcing interest rates higher, according to Bloomberg News. Most stocks were hurt by bonds, which fell on concern the Fed may raise interest rates to slow the economy, according to Bloomberg.
Greenspan said it was almost impossible to predict how much longer the healthy U.S. economy could hold up the rest of the suffering world economy and that key policymakers should keep an open mind to economic change, according to Reuters. While he saw the global economy stabilizing, Greenspan warned that it was still in a fragile condition.
In the Internet sector, stocks closed in negative territory. Shares of Amazon.com dropped 9.12 to 137.37. Internet directories America Online, Yahoo, Infoseek, and Lycos ended the day weaker. AOL lost 9.25 to 120.5, shares of Yahoo slid 9.43 to 151.87, Infoseek fell 4.5 to 50.62, and Lycos fell 5.56 to 89. Excite, which saw its shares get a lift in the afternoon, also ended the day in the red, down 2.75 at 157.
Most computer makers continued to trade even lower. Apple fell 2.5 to 44.5 at the close, IBM fell 2.87 to 209.25, Dell dipped 1.87 to 39.43, Gateway dropped 2.5 to 64.12, and Hewlett-Packard lost 2.93 to 77.31. Meanwhile, Compaq closed ahead 1.25 at 24.62.
Bloomberg and Reuters contributed to this report.