| Stocks flat on greenspan raising interest rate worries Original Source Link: (May no longer be active) http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5374240http://www.reuters.com/newsArticle.jhtml?type=businessNews&storyID=5374240
Stocks Flat, Greenspan Raises Worries Tue Jun 8, 2004 12:25 PM ET
By Vivian Chu NEW YORK (Reuters) - U.S. stocks were flat on Tuesday as investors worried that comments from Federal Reserve chief Alan Greenspan could mean the central bank may raise interest rates more aggressively than expected.
Shares of leading home builders also retreated, a day after Dominion Homes Inc. (DHOM.O: Quote, Profile, Research) forecast quarterly home sales would be "significantly below" the year-ago period due to rising interest rates. The Dow Jones Home Building Index slid 3.4 percent.
Greenspan told a bankers' conference in London that the Fed would do "what is required" to keep inflation in check.
"Greenspan's comments did keep the rally from continuing. The market's gone back and forth as to how aggressive he'll be fighting inflation and raising rates, and today's view is that he's going to be quicker to raise rates than people thought last week," said Rick Mackerel, president of LibertyView Capital Management.
The Dow Jones industrial average eased 1.21 points, or 0.01 percent, to 10,389.87. The Standard & Poor's 500 Index slid 1.98 points, or 0.17 percent, at 1,138.44. The technology-laced Nasdaq Composite Index was down 5.16 points, or 0.26 percent, at 2,015.46.
Investors were also locking in recent gains after two straight days of advances, traders said. On Monday, U.S. stocks rallied to their highest level in a month.
"We had a huge up day yesterday, and we're seeing some short-term profit-taking today," said John O'Donoghue, co-head of listed trading at Credit Suisse First Boston.
The Fed policy-making committee believes that "monetary policy accommodation can be removed at a pace that is likely to be measured," Greenspan said at the conference.
But if that proves wrong, the Fed "is prepared to do what is required to fulfill our obligations to achieve the maintenance of price stability ..." Greenspan said.
He said oil prices were a risk in the outlook.
"Higher oil prices, if they persist, are likely to boost core consumer prices, as well as the total price level, in this country," Greenspan said. "The recent modest declines in oil and natural gas prices may or may not signal a trend but are nonetheless welcome."
A sharp profit recovery in U.S. businesses was evidence of "the restoration of a significant degree of pricing power," which was also visible in rising core consumer prices, Greenspan said.
Texas Instruments Inc. (TXN.N: Quote, Profile, Research) was among the New York Stock Exchange's most actively traded issues, a day after it narrowed its earnings outlook to the high end of its previous range, which disappointed investors counting on bigger gains. TI shares fell 38 cents, or 1.5 percent, to $25.85.
On the Nasdaq, Dominion was the biggest percentage loser, a day after it said April and May unit sales were down 15 percent from year-ago levels. Its shares gave up $4.80, or 16.4 percent, to $24.53.
Alliance Gaming Corp. (AGI.N: Quote, Profile, Research) shares also sank, after the slot machine maker cut its profit forecasts for this fiscal year and next, blaming lower revenue from some games, uncertainty about orders and competition, and higher expenses. Alliance shares gave up $4.64, or 21.7 percent, to $16.75.
But Korn/Ferry International (KFY.N: Quote, Profile, Research) shares rose after the executive search firm posted a quarterly profit versus a year-ago loss, as the improving job market spurred increased demand for its services. Korn/Ferry shares jumped 66 cents, or 4.1 percent, to $16.64. It also forecast current quarter earnings well above Wall Street estimates.
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