Stock prices fluctuated Thursday but ended lower as cautionary remarks by Federal Reserve Chairman Alan Greenspan fed investors' increasing worries about inflation. The Dow Jones industrial average closed down 8.59 at 10,946.82. The Dow fell as much as 103 points during the day, then tried but failed to recover ground just before the close. Broader market indicators also were mostly lower. Investors are increasingly concerned that the robust economy will reawaken inflation and prompt the Fed to push rates higher when its policy writers meet in two weeks.
Higher rates are the market's nemesis because they can quickly eat into corporate earnings.
In remarks to bankers in Chicago, Greenspan praised the performance of the U.S. economy in recent years but warned that gains in productivity cannot keep inflation at bay forever. He said tight labor markets, for example, could ultimately threaten the expansion. As he has in the past, Greenspan also expressed concern that the high-flying stock market could suddenly come back to earth, causing a reversal of the wealth effect that has powered consumer spending His morning speech caused already jittery stock and bond markets to fall throughout the day. The Treasury's 30-year bond carried a yield of 5.78 percent, its highest level since June. The bond had closed late Wednesday with a yield of 5.70 percent.