U.S. stock markets stumbled Wednesday as they interpreted remarks from U.S. Federal Reserve chairman Alan Greenspan to mean it is now much less likely that the Fed will cut interest rates before its next scheduled policy meeting March 20.
At the close, the Dow Jones Industrial Average stood at 10495, down 141 points on the day. The Nasdaq Composite index slid 56 points to 2151, a new 26-month closing low.
In Canada, the TSE 300 rallied in the last hour to finish at 8079, up 13 points, while the Canadian Venture Exchange dropped 13 points to 3062.
Testifying in Washington before the U.S. House of Representative financial services committee, Greenspan said the slowdown in the American economy that started late last year "has yet to run its full course." Greenspan's comment was widely interpreted to mean the Fed will chop interest rates again, but probably not before its next meeting.
- FROM FEB.26, 2001: Markets score big gains on rate cut hopes
Greenspan said he is watching consumer confidence closely. That measure of economic health fell in February to its lowest level in over four years.
"Changes in consumer confidence will require close scrutiny in the period ahead, especially after the steep fall of recent months," Greenspan said.
He did point out that sales of vehicles and homes remained strong, indicating consumers are still willing to make long-term commitments.
Greenspan added that the abrupt economic slowdown in late 2000 was less in evidence in January and February.
On Tuesday night, U.S. president George Bush unveiled his budget plans for a major tax cut to stimulate the economy.