US stocks lower after Greenspan assessment

US investors adopted a wait-and-see attitude on the economy, despite Federal Reserve Chairman Alan Greenspan’s improved assessment, and sent stocks modestly lower today.

While Greenspan said the US economy had “regained some traction” after the summer’s slowdown, investors looked past his congressional testimony, focusing instead on uncertainty about the health of the economy, third-quarter earnings pre-announcements and fiscal policy.

Greenspan gave no strong indications whether the Fed would raise interest rates at its meeting on September 21.

While many analysts believe a quarter percentage point increase is likely, others wonder if election year politics will cause the Fed to skip a rate hike until November. The benchmark rate stands at 1.5%.

The Dow Jones industrial average fell 29.43, or 0.3%, to 10,313.36.

Broader stock indicators were also lower. The Standard & Poor’s 500 index was down 5.03, or 0.4%, at 1,116.27, while the Nasdaq composite index dropped 7.92, or 0.4%, to 1,850.64.

With terror fears fading after the close of the political conventions and oil prices on the decline, investors are firmly focused on economic numbers, with an eye toward how the Fed will interpret the data when it looks at interest rates.

Since third-quarter earnings are likely to be reduced due to the summer’s high oil prices, the market has mostly discounted the forthcoming earnings season - even though double-digit profit growth is still likely – with hopes of a resurgence in profits in the fourth quarter to go along with the elections and, hopefully, more strength in the economy.

Despite his cautiously optimistic assessment, Greenspan echoed Wall Street’s concerns over oil prices, which have fallen from record highs in recent weeks but stubbornly remain above $40 per barrel.

A barrel of light crude for October delivery was quoted at $42.77, down 54 cents, on the New York Mercantile Exchange.

Dow component Coca-Cola dropped $2.20 to $43.45 after its chief bottler, Coca-Cola Enterprises, issued warnings over its third-quarter earnings and reduced its full-year outlook due to lower demand for the company’s soft drinks. Coca-Cola Enterprises fell $1.11 to $19.48.

Shares in Wal-Mart Stores were down 21 cents at $53.08 after the retailer’s chief executive told an investing conference that Christmas sales would likely meet expectations.

Fast food chain McDonald’s said its sales from stores open at least a year rose 3.9% in August, citing improved services and more menu options. McDonald’s gained 12 cents to $27.50.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume totalled 1.25 billion shares, compared to 1.21 billion on Tuesday.

The Russell 2000 index of smaller companies was down 5.17, or 0.9%, at 557.76.