Stocks mixed, markets trim losses following Greenspan's remarks

AP Business WriterNEW YORK (AP) -- Soothing words from Federal Reserve Chairman Alan Greenspan calmed Wall Street Tuesday, enabling the market to recover from a sharp early drop and at least temporarily stabilize after Monday's volatility.

The Dow Jones industrials climbed back to a more moderate loss after dropping more than 230 points, while the tech sector eked out an advance. But investors remained anxious after eight weeks of heavy selling, including the price swings Monday, when the Dow fell as 439 before recovering to a loss of 45 by the close.

Greenspan told the Senate Banking Committee the economy is on its way to full recovery, although it will keep feeling the effects of last year's recession. Greenspan also said the Fed will not start raising interest rates until the economy shows further strengthening.

In midafternoon trading, the Dow Jones industrial average was down 91.24, or 1.1 percent, at 8,547.95, after falling 232 in early trading. The Dow has fallen 740.31 points over the past six losing sessions, four of which were marked by triple-digit drops.

The market's broader indicators were mixed. The tech-heavy Nasdaq composite index rose 4.05, or 0.3 percent, to 1,386.67.

The Standard & Poor's 500 index declined 7.58, or 0.8 percent, to 910.35.

The market reduced its losses after Greenspan began his testimony, and investors began to focus on other positive economic news. The Fed reported industrial production increased by 0.8 percent in June, the sixth consecutive monthly gain.

The economic assessments heartened investors who have been worried about companies' second-quarter earnings and outlooks for the remainder of the year. But investors still played it safe in Tuesday's dealings, mindful of a series of corporate bookkeeping scandals.

"It is an emotional market," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.

Analysts expect investors to continue their retreat from the market until they see earnings growing again. While companies are reporting second-quarter earnings in line with or above analyst expectations, the numbers so far haven't been enough to shake the market out of its slump.

"As the improving economy shows improving profits, that is what will get investors' attention," said Ronald J. Hill, investment strategist at Brown Brothers Harriman & Co.

Caterpillar dropped $1.95 to $43.24 after its second-quarter earnings missed analysts' forecast by 15 cents a share.

And, General Motors fell $1.32 to $46.60 despite posting second-quarter earnings that were 21 cents a share higher than analysts were expecting. GM added to losses from last week when several brokerages downgraded the stock, citing among their reasons concerns about the company's ability to fund its pension plan.

Intel, due to release earnings later in the day, declined 54 cents to $18.58.

But Johnson & Johnson rose 95 cents to $49.95 on second-quarter earnings that exceeded analysts' expectations by 2 cents a share.

Declining issues led advancers slightly nearly 8 to 7 on the New York Stock Exchange. Volume came to 1.23 billion shares, ahead of 1.15 billion at the same point Monday.

The Russell 2000 index, which tracks smaller company stocks, rose 1.61, or 0.4 percent, to 410.69.

Overseas, markets were mixed Tuesday. Japan's Nikkei stock average closed down 1.2 percent. In Europe, France's CAC-40 slipped 0.2 percent, while Britain's FTSE 100 rose 0.7 percent, and in late-day trading, Germany's DAX index was up 2.0 percent.

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