NEW YORK -- Stock prices swung in a wide arc yesterday, ending with a sizable drop on fading hopes of further interest-rate cuts. The Dow Jones industrial average, which posted solid gains earlier in the day, plunged after remarks on the economy by Alan Greenspan, chairman of the Federal Reserve Board.
The Dow ended the day at 3,224.96, down 47.18 points, or nearly 1.5 percent. But that was 74 points shy of the day's high, the
biggest one-day spread since a 120-point swing on Nov. 15, 1990, when the market unraveled during a period when futures and options were expiring.
The morning began in weakness as foreign investors sold and disappeared, but then prices moved up steadily through midday, until Mr. Greenspan, speaking before the Senate Banking Committee, gave the market a large dose of disappointment, traders said.
"Mr. Greenspan's comments around midday that the economy was already in the process of stabilizing and could show a reasonable improvement in the near term, created a very unfriendly bond market to provide the equity market with support," said Bernard Spilko, senior vice president of the New York branch of Bank Julius Baer.
Mr. Greenspan said that while the economy showed no signs of revival, recent interest rate cuts should be sufficient, and that he was not inclined to relax credit again soon. Traders noted that he had said these things before, and they remarked it was more a disappointment than a surprise to hear them. After President Bush's State of the Union Message Tuesday night, many investors were expecting a shift by the Fed.
Volume on the New York Stock Exchange was heavy, at 249 million shares, up from 217.2 million Tuesday, with losing issues outpacing gainers by 1,054 to 653. The Big Board composite closed at 226.64, down 2.31.
The Standard & Poor's index of 500 stocks, another blue-chip indicator, fell to 410.34, down 4.62 points, while the American Stock Exchange index fell 3.07 points, to 409.64.
Most of the early gains in the Dow industrials came from Procter & Gamble, up 1 1/2 , to 104 1/8 ; Merck, down 5/8 , to 152 3/8 ; Philip Morris, down 1/2 , to 75 3/4 , and Allied-Signal, up 1, to 48 1/2 . Allied was helped by a Morgan Stanley recommendation.
With the expectation that military spending is about to be cut, Boeing fell 3, to 50 5/8 ; General Dynamics 5/8 , to 56 5/8 , General Electric 3/4 , to 77 3/4 , and Northrop 1/2 , to 25 1/2 .
Elsewhere in the market, Roadway Services, a company engaged in trucking and leasing rose 4, to 71 1/4 , as Dean Witter Reynolds repeated a "buy" rating, traders said. On Tuesday, the company reported a rise in its fourth-quarter earnings.