NEW YORK, April 17 (UPI) -- Stock prices on the New York Stock Exchange and the Nasdaq Stock Market ended off in active trading Wednesday, pressured by some profit-taking as investors digested comments from Federal Reserve Chairman Alan Greenspan.
The blue-chip Dow Jones industrial average dropped 80.54 points, 0.78 percent, to close at 10,220.78. The tech-heavy Nasdaq composite index dropped 5.93 points, or 0.33 percent, to close at 1,810.86.
The broader New York Stock Exchange composite index was down 1.25 points to close at 593.48 while the Standard & Poor's 500 dropped 2.28 points to close at 1,126.09.
The American Stock Exchange composite index added 4.44 points to close at 918.35 while the Wilshire 5000 Index was ahead 6.85 to 10,676.26.
Volume was 1.57 billion on the Big Board and 1.86 billion on the Nasdaq Stock Market.
Market breadth was mixed with advancers beating decliners by 16 to 15 on the NYSE and decliners beating advancers by 18 to 16 on the Nasdaq.
Analysts said blue chips eased on some profit-taking following Tuesday's buying binge.
The spotlight at midday was on Federal Reserve Chairman Alan Greenspan who was speaking before the Joint Economic Committee of Congress about monetary policy and the economic outlook.
Greenspan said the U.S. central bank could afford to wait until the economic recovery is entrenched before raising interest rates, asserting that inflation is likely to stay low for some time.
Greenspan validated growing expectations on Wall Street that the Fed won't raise its key federal-funds rate before August. He said the U.S. economy is gaining steam, but the strength of the recovery still remains uncertain.
"Prospects for low inflation and inflation expectations in the period ahead mean that the Federal Reserve should have ample opportunity to keep inflation pressures contained once sustained, solid economic expansion is in view," Greenspan said.
As the economy slipped into recession last year, the Fed cut the key funds rate to a 40-year-low of 1.75 percent.
In the last three months of 2001, however, the economy grew by a larger-than-expected 1.7 percent. The Fed halted its campaign of interest-rate cuts and began to lay the foundation for an eventual increase in rates.
Greenspan said the current level of the funds rate "is not likely to be consistent with maintaining price stability" in the future, implying the Fed will eventually have to raise the rate.
Some economists think the Fed may adopt a preference for higher interest rates as early as May 7, when its top policymakers next meet.
Greenspan said, however, that higher interest rates aren't warranted for now because the economic outlook remains uncertain.
Surging oil prices pose a new danger to the recovery, he said. And it remains unclear whether consumer and business spending will remain strong once businesses finish replenishing inventories depleted during the recession.
"The strength of the economic expansion that is underway remains to be clarified," Greenspan said, although "there can be little doubt that prospects have brightened."
"Some of the forces that have weighed heavily on the economy over the past year or so have begun to dissipate, but other factors, such as the sharp increase in world oil prices, have arisen that pose new challenges," Greenspan said. "As a result, the course of final demand will need to be monitored closely."
Greenspan downplayed worries that the surprising strength of U.S. housing prices during the recession indicates a "bubble" in the market. Selling houses, he said, is much more cumbersome than selling stocks, because home sales involve "substantial" transaction costs and the seller must physically move out when the sale occurs.
"Thus, while stock-market turnover is more than 100 percent annually, the turnover of home ownership is less than 10 percent annually, scarcely tinder for speculative conflagration," Greenspan said.
On the economic front, the Commerce Department said the nation's trade deficit posted its widest deficit in 10 months during February.
The government agency said the nation's trade gap widened to a seasonally adjusted $31.5 billion from a revised $28.2 billion in January, which was originally reported as a $28.5 billion deficit. The February gap was the largest since $31.9 billion in April 2001.
Most economists on Wall Street expected the trade gap to widen to $29 billion during the month.
Economists watch for the report not only to gauge U.S. and overseas demand but also to calculate gross domestic product. Imports are subtracted from economic growth, because they presumably replace U.S.-produced goods, while exports add to growth estimates.
Meanwhile, investors continued to digest a barrage of earnings results.
After the closing bell on Tuesday, Intel reported earnings of 15 cents a share, meeting analysts' estimate. Revenue rose 3 percent to $6.78 billion. The chipmaker also said it sees second-quarter revenue ranging between $6.4 billion and $7 billion.
Ford Motor posted upbeat results, following in General Motors footsteps. Ford reported a narrower than expected first-quarter operating loss of 6 cents a share, compared with earnings per share of 60 cents a year ago, on a 6.1 percent drop in revenues.
But, the automaker also said it is on schedule to meet or surpass its 2002 earnings per share milestone.
Ford said it would beat second-quarter earnings estimates by at least 9 cents a share, thanks to strong production, and said it was comfortable with analysts' forecasts for full-year earnings.
Ford said it expected second-quarter earnings to "exceed consensus estimate by as least as much as in first quarter," or 9 cents a share.
Analysts had been expecting Ford to earn 14 cents a share on average, according to Thomson Financial/First Call.
JP Morgan Chase reported first-quarter operating net of 57 cents a share, compared with 74 cents a share year ago, on 15 percent lower operating revenue.
Meanwhile, U.S. Treasury prices were mixed with long issues taking a hit. The 10-year Treasury note lost 1/4 to yield 5.22 percent and the 30-year government bond dropped 25/32 to yield 5.715 percent.
In Europe, stock prices ended little changed in London, Frankfurt and Paris. The London International Stock Exchange's blue-chip FTSE-100 index added 2.9 points to 5,262.8. The German DAX index slipped 16.35 points to 5,327.53 and the French CAC-40 index eased 1.44 points to 4,597.30.
Analysts said British stocks inched higher following news the government will continue to pursue a target of 2.5 percent annual inflation.
Chancellor of the Exchequer Gordon Brown said in his presentation of the U.K. budget for the year to March 2003 that he had written to Bank of England governor Sir Eddie George to tell him the target is being continued.
Brown maintained his November forecast that GDP will grow between 2.0 and 2.5 percent this year, after 2.2 percent growth last year.
He raised the 2003 GDP growth forecast to 3.0 to 3.5 percent from 2.25 to 2.75 percent.
Earlier in Asia, prices on the Tokyo Stock Exchange ended higher for the third consecutive session, lifted by Tuesday's buying binge on Wall Street and strength in the technology sector. Japan's blue-chip Nikkei Stock Average of 225 selective issues, which rose 209.36 points Tuesday, gained another 197.05 points, or 1.7 percent, to 11,543.71 -- its first close above the 11,500 level since March 20.
Analysts said buying in automotive and chip shares pushed the market higher, sparked by the rally on Wall Street and positive earnings reports by Intel and General Motors.
But, gains were tempered by caution ahead of the release of earnings by Japanese retail and electronics companies through the end of next week.
These companies are generally expected to release disappointing earnings numbers, analysts said.
Elsewhere in Asia, prices ended sharply higher in moderate trading on the Hong Kong Stock Exchange, posting their biggest one-day gain since Feb. 11 on speculation that the government's second-quarter sale of Tracker Fund units were completed. The blue-chip Hang Seng Index jumped 302.05 points, or 2.8 percent, to 11,090.58.
The market was also supported by the hefty Wall Street gains and strength in telecommunication and property issues.
The Tracker Fund units consist of blue chips' shares accumulated by the government in its stock market intervention at the height of the Asian financial crisis in 1998. The government released 530 million units for sale in the second quarter but 205 million of them were still outstanding by the end of Tuesday.
The fund is an open-end investment trust that gives investors exposure to a basket of 33 stocks that form part of the Hang Seng Index. It was designed to closely mimic the performance of the Hang Seng Index, so that when the index is up 1 percent, the fund is also up 1 percent -- give or take a few basis points.
The government said after the market closed that all the units outstanding have been sold.
Meanwhile, prices rose to their highest level in 26 months on the South Korean Stock Exchange, lifted by strength in technology issues. The Korea Composite Stock Price Index, or Kospi, jumped 29.22 points, or 3.24 percent, to 930.51 -- its highest closing level since it hit 953.22 on Feb. 11, 2000.
Meanwhile, prices rose to their highest level in more than 2 years on the Taiwan Stock Exchange. The Weighted Index jumped 132.95 points, or 2.12 percent, to 6,390.68 -- its highest closing level since Sept. 29, 2000.
Elsewhere around the Pacific region, prices ended higher on the Australian Stock Exchange, lifted by Tuesday's rally on Wall Street. The blue-chip All Ordinaries Index rose 13.70 points, or 0.41 percent, to 3,350.60.
