Greenspan Sees Weakness Lingering, Hints Of No Immediate Cut In Rates.(A)

By Donald H. Gold

Investor's Business Daily

The economy's still in a slowdown, but it's not as bad as it was late in thefourth quarter, Federal Reserve Chairman Alan Greenspan told Congress Wednesday in remarks that broadly hinted he felt no pressing need to cut interest rates right away.

And a Commerce Department report showed the slowdown, which hit sometime in the fourth quarter, was sharper than previously thought.

Greenspan's picture of a sharply slowing economy -- and hints of more interest-rate cuts coming -- hit the financial markets. The Treasury's benchmark 10-year note rose 10/32, sending the yield 6 basis points lower to 4.91%. The dollar fell in Europe, with the euro rising 0.56 cent to 92.20 cents.

But share prices tumbled as hopes for an inter-meeting Fed rate cut dimmed. The Dow Jones industrial average sank 141.60 points, or 1.33%, to 10,495.28. The Nasdaq composite index lost 55.99 points, or 2.54%, to 2151.83.

In his second appearance before Congress in two weeks, Greenspan said the economy is working off the excesses piled up in 1999 and early 2000. But his outlook is bright. He said the fundamentals that let the economy boom for 10 years are still in place.