In case you're one of the few investors out there who believes the US economy is too big and robust to be bothered by Russia or Brazil, listen to what Alan Greenspan had to say Wednesday:
"We are clearly facing a set of forces that should be dampening demand going forward to an unknown extent," Greenspan said at a meeting of economists in Washington.
He said worldwide uncertainty is causing capital lenders of all kinds -- IPO junkies, bond investors, even commercial banks -- to avoid risk. So even companies that don't have anything to do with Russia, Brazil, or anyone outside their state of incorporation are suddenly finding themselves without capital to help them expand, hire more workers, advertise on the Internet, or invest in research and development. Under those conditions, not even titans like Microsoft, Intel, Cisco Systems, or America Online will escape unscathed.
"The one thing that has been a major positive for the US stock market is the growth rate for lending and money supply has been ample," said Hugh Johnson, chief investment officer at First Albany. "If banks reduce or slow lending, that may remove the big plus for the market."
The Wired Index fell 6.44 to 333.76 while the Dow Jones Industrial Average dropped 1.29 to 7741.69. Most worrisome, the Nasdaq -- home of the high-flying tech stocks that propped up the bull market of the past decade -- fell another 48.28 to 1462.61. In case you've lost track, the Nasdaq is down 565 points since its peak of 2028.18 just two months ago.
At least Greenspan's comments didn't freak the economists out entirely. Some analysts who heard the speech interpreted the chairman's comments to mean that another interest-rate cut, possibly a big one, is possible. A cut usually boosts the economy because it makes loans cheaper for borrowers -- companies and consumers alike.
"What he's telling us is that we don't know what it is going to take to keep the economy moving ahead," said John Silvia, chief economist at Scudder Kemper Investments in Chicago. "Because of all these unknowns, there's a lot more ... possibility of an inter-meeting move" -- in other words, a rate cut.
Until then, stocks likely will continue to get hammered. On Wednesday, Internet stocks like AOL and Yahoo led the declines, even though both companies had some good news.
AOL said it's expanding its empire. As part of its strategy to expand into international markets, AOL began service in Australia. Bertelsmann, the world's third-biggest media company and an AOL investor, will back the venture, the companies said. Still, AOL (AOL) fell US$7 to $90.63.
Yahoo (YHOO), which analysts said would report better-than-expected earnings after the market closed, fell $10.38 to $114.44.
PC stocks also fell. Microsoft (MSFT) lost $3.69 to $93.94, after the US Justice Department said that if it wins a major antitrust trial proving abuse of monopoly power, it would seek a new court hearing to impose additional remedies against the world's biggest software company. Justice didn't spell out what it would seek.
Intel (INTC) dropped 50 cents to $79.13 and Dell Computer (DELL) declined $4.69 to $50.63.
Applied Materials (AMAT), the world's biggest manufacturer of chipmaking equipment, was up for most of the day, following better-than-expected earnings from Advanced Micro Devices on Tuesday. AMD told analysts that it believes most PC makers have burned off most of their chip inventory and would start ordering again, which would be good news for suppliers like Applied Materials. But in the end, the semiconductor capital-equipment manufacturer fell 56 cents to $23.
There's no stopping Cisco Systems' slide. Stock of the world's biggest computer-networking gearmaker fell again for the fourth trading day in a row. Analysts are increasingly wary that Cisco won't report a big jump in earnings -- as it has quarter after quarter, year after year -- this time around. Many of its customers are cutting back on capital expenditure, including purchases of Cisco staples like routers and switches. Cisco (CSCO) dropped $2.31 to $43.88. It's down 21 percent since Friday, when the slide first began.
The dollar plunged against most world currencies last night, including the deutsche mark. That's bad news for industrial conglomerate Daimler-Benz, which also makes luxury cars. The falling dollar makes it more expensive for an American to buy that sweet yellow SLK Roadster. Shares in Daimler (DAI), Europe's biggest industrial company and soon-to-be owner of Chrysler, fell $2.38 to $69.63 in the United States. It also fell on the German stock market.
Reuters (RTRSY) shares fell 25 cents to $43.50. The world's biggest financial data vendor agreed to distribute news from rival Dow Jones & Co. through its worldwide network of terminals. Reuters and Dow Jones said the move will improve service to their respective customers. But could it be that the two are ganging up to fend off Bloomberg, the their nimbler archrival?
Sony shares surged, along with the rest of the Japanese stock market. Japanese leaders moved closer to approving a proposal to pump public funds into weak banks, a move that would buy some time to prevent a collapse of Japan's financial system. Sony (RTRSY) rose $5.38 to $69.75, the biggest gainer on the Wired Index.
Financial columnist David Lazarus is on vacation. Reuters contributed to this report.
