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Fri, Mar 02, 2001 EST
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Stocks Fall as Greenspan Delivers Sobering News
By Lisa Singhania   Associated Press
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NEW YORK — Disappointed investors sent stocks down sharply Wednesday on remarks by Federal Reserve Chairman Alan Greenspan that suggested an interest rate cut before the Fed's next meeting is unlikely.

Greenspan's comments that the central bank prefers to adjust rates at scheduled meetings brought sellers back to Wall Street. Investors had been buying on speculation that the Fed would lower rates before the March 20 gathering of its policy-making Open Market Committee.

News that the economy grew in the last quarter of 2000 at the slowest rate in five years futher soured the market's mood.

In late afternoon trading, the Dow Jones industrial average dropped 197.16 to 10,439.72.

The Nasdaq composite index fell 71.55 to 2,136.27, continuing to trade at levels not seen since December 1998. The Standard & Poor's 500 index slid 25.99 to 1,231.95.

"The optimism that we had earlier this week that we might get a pre-emptive cut is going away," said Todd Clark, co-head of trading at WR Hambrecht. "The market is looking at everything being negative right now, so we're going to sell off."

Indeed, Greenspan's comments to the House Financial Services Committee appeared to all but dash hopes of a rate cut anytime soon. He testified that the central bank will act as necessary to help the economy, but prefers to act according to its schedule. He also noted that the economy appeared to be stronger in January and February than in November and December.

The Fed has cut interest rates twice in the new year.

Financial and manufacturing stocks slid, led by J.P. Morgan Chase, down $1.64 at $45.96, and General Electric, off $2.14 at $45.86. General Motors lost $1.46 to $53.14.

Technology stocks also fell. Oracle dropped $2.56 to $19.13 and IBM, a Dow component, slid $3.25 to $99.34.

The Fed's lack of action was met with disappointment because of the recent deterioration in the economy and stock markets.

Although the central bank is still expected to cut rates when it meets March 20, many market observers believe the Fed needs to act sooner to reassure Wall Street. After weeks of dismal corporate results and profit warnings, many investors are desperately looking for a reason to buy instead of sell. A rate cut now might have provided a to catalyst to rally on and — at least temporarily — halted the market's descent.

Also Wednesday, Wall Street got another sign that the economy is faltering. The Commerce Department reported the gross domestic product grew at a rate of 1.1 percent in the final three months of 2001, the weakest performance in more than five years.

Declining issues outnumbered advancers nearly 3 to 2 on the New York Stock Exchange. Volume came to 876.10 million shares, compared with 867.200 million at the same time Tuesday.

The Russell 2000 index dropped 7.22 to 471.53.

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