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Dow slides before Greenspan; Nasdaq keeps afloat

NEW YORK: US blue chips sank on Wednesday as interest-rate-sensitive stocks sold off ahead of testimony from Federal Reserve Chairman Alan Greenspan while the Nasdaq market kept afloat on the strength of biotechnology issues.

"Everybody is putting on their flak jackets for tomorrow's Greenspan testimony," said Charles Payne, head analyst at Wall Street Strategies. "The fear is he may want to talk the market into some sort of submission. There are still pockets of excitement here and there, but the money is just cooling its heels."

Anxiety on the eve of Greenspan's semi-annual Humphrey-Hawkins testimony to Congress came on a day that interest-rate fears were further fanned by news of stronger-than-expected January housing starts.

The Dow Jones industrial average lost 156.68 points, or 1.46 percent, to 10,561.41. The broader Standard & Poor's 500 Index eased 14.38 points, or 1.03 percent, to 1,387.67.

The Dow was yanked down by interest-rate-sensitive financial stocks, with American Express Co. down 6-3/4 at 152-3/8 and J.P. Morgan off 2-13/16 at 112-13/16.

Bucking the trend in the Dow was computer maker Hewlett-Packard Co., up 3-15/16 to 129-1/16 ahead of its earnings announcement, which was expected after the market's close.

The Nasdaq Composite Index inched up 6.88 points, or 0.16 percent, to 4,427.65.

A big Nasdaq gainer was Applied Materials Inc., the world's largest maker of equipment for building computer chips, which surged 6-7/8 to 173-3/8 and touched a new high after its quarterly earnings beat expectations.

Biotech stocks helped the Nasdaq stay on positive ground, spurred in part by news that genomics company Human Genome Sciences Inc. had patented a gene considered key to HIV infection, analysts said.

Human Genome shot up 33-1/4 to 188 while the Nasdaq biotech index gained 8.17 percent, closing at a new high of 1,299.19.

Although the Fed's rate-setting committee does not meet until March, Wall Street was waiting to see if Greenspan, who has voiced concern about the US economy's strength, will give clues on how aggressive the Fed will be about raising rates.

Also unsettling the market on Wednesday was news that housing starts rose 1.5 percent to 1.775 million units for January -- above economists' forecast of 1.65 million units.

"It was certainly stronger than I was looking for," said Harvey Hirshhorn, chief economist and investment strategist for Stein Roe & Farnham. "It certainly is just one more piece of data that indicates this economy is doing extremely well and one more piece of data suggesting the Fed likely will raise rates again at its March meeting."

Wall Street was also anticipating data on wholesale and retail prices on Thursday and Friday, respectively, which will provide clues to inflationary pressures and monetary policy.

The benchmark 30-year US Treasury Bond was down 7/32, with the yield rising to 6.26 percent from 6.24 percent at Tuesday's close.

On the New York Stock Exchange, decliners beat advances by about 17 to 12 with about 1.02 billion shares changing hands. There were 56 stocks hitting new highs and 147 hitting new lows.

The pockets of strong performing sectors included biotechnology, software, semiconductors, heavy construction and oil while retail, banking, entertainment and footware all lost ground.

One retailing stock particularly feeling the pain was Abercrombie & Fitch Co., which lost 9-3/8 to 15 after the retailer said sales slowed in the fourth quarter, catching investors off guard, analysts said.

Shares of Wal-Mart Stores Inc. eased 3-15/16 to 52-7/8 after posting a higher-than-expected 23 percent rise in quarterly profits. But the world's largest retailer warned that increasing costs could pressure growth this year.

The Standard and Poor's retail index fell 4.58 percent, underperforming the general market.

On the upside, Lycos Inc., the fourth most popular Web media network, rose 3-9/16 to 72-5/8 after the company reported second quarter earnings that also topped estimates.

On the initial public offering front, shares of LendingTree Inc., a personal loan marketplace on the Web, gained 6 to 18 in its first day of trading on Wednesday after its initial public offering, in which its stock was priced Tuesday at $12.-Reuters