Greenspan Sends Prices Into Tailspin --- Dow Plunges 47.18, Bonds Fall on Hint Of Inaction at Fed
NEW YORK -- Stock and bond prices plunged after Federal Reserve Chairman Alan Greenspan indicated the central bank probably won't lower interest rates further anytime soon. The dollar was mixed.</br></br>Long-term Treasury bond prices fell about $11.25 for each $1,000 face amount, pushing some long-term interest rates above 7.7%. The Dow Jones Industrial Average slumped 47.18 to 3224.96 in heavy trading. Standard & Poor's 500-stock index was off 4.62 to 410.34, and the Nasdaq Composite Index fell 4.98 to 616.31.</br></br>Both the stock and bond markets opened on a stable footing after President Bush's State of the Union address Tuesday night, in which he laid out a package of proposals aimed at stimulating economic growth. But later, Mr. Greenspan told a congressional committee that he thinks interest rates are already low enough to spark an economic recovery and that the Fed probably won't hurry to push them lower.</br></br>That upset bond investors, who had been counting on another reduction by the Fed. And as long-term interest rates headed higher, nervous stock investors grew fearful that the higher rates could choke off an economic recovery even before it begins.</br></br>The sharp retreat came on the heels of the Dow industrials' rise to a record Tuesday. If investors become convinced that the Fed isn't going to help the economy, a full-blown correction could materialize, some analysts suggested.