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American Morning

Wall Street Reacts Negatively to Greenspan Testimony

Aired July 18, 2001 - 10:48   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LEON HARRIS, CNN ANCHOR: Fed Chairman Alan Greenspan is on Capitol Hill this morning. He's talking about the state of the economy and his semi-annual testimony on monetary policy. And as you know, as always happens, Mr. Greenspan speaks and Wall Street reacts. And so far, the reaction has continued to be negative.

Our financial news anchor, Lou Dobbs, has also been listening for us this morning. He checks it with now with his interpretation on what we've seen and heard so far -- Lou.

LOU DOBBS, "MONEYLINE": Leon, the interpretation is rather an easy task this morning. The Dow Jones industrials lost about 70 points since the Fed Chairman began his testimony. That testimony has now concluded. He's now in the question and answer period of his appearance before the House Financial Services Committee.

The Nasdaq has fallen just a little over 20 points since the Fed Chairman began his testimony. So the anxiety that has surrounded his appearance with the uncertainty about the direction of the economy, adding to the weight on those indexes and stock prices in general.

We're going now to Christine Romans at the New York Stock Exchange to bring us up to date on what everything looks like there. Christine?

CHRISTINE ROMANS, CNN CORRESPONDENT: Hi, there, Lou.

You're right. It looks pretty weak and soggy here overall. The market in the grips of earnings angst because everything that Mr. Greenspan had to say didn't paint a picture that changes anything. It shows that the economy is still weak, traders here are saying. It shows the market, the economy might need another interest rate cut.

And folks are saying, "Well, that doesn't clear up any worries about the profit picture going forward." At least not at this juncture until you've seen the Dow Jones industrial average down triple digits here.

You know, there are a lot of different things going on. It's really a lot of things to talk about in terms of earnings news here today. And then American Express comes out and says it's going to cut some jobs. We've got J.P. Morgan missing the Street's expectations for its profit report. And when you look, Lou, at where the buying is coming in in this market, it's things like tobacco stocks, drug stocks, some food and beverage stocks. And as you know, that's all defensive buying.

DOBBS: Defensive buying. And indeed, we've seen some strength in both the 10 and 30 year bond. All of this coming as a result -- we shouldn't put all of the weight on Alan Greenspan's shoulders I suppose this morning because there are significant earnings disappointments here. Clear uncertainty about the direction of the economy.

But a clear statement. And Christine Romans, thank you very much for that report from the New York Exchange, but a clear statement from the Fed Chairman that there is a possibility of a further interest rate reduction. And again, the federal open market committee will meet again on August 21, the policy setting arm that determines the direction of interest rates on August 21.

So the Fed Chairman is obviously and for him, an unusual way expressing himself clearly about the uncertainty about the health of the economy and whether or not there will be another interest reduction.

We will continue to follow the Fed Chairman's comments before the House Financial Services Committee here on CNN. Please stay with us.

I'm Lou Dobbs in New York.

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