Reassurances from US Federal Reserve chairman, Mr Alan Greenspan, that the world's largest economy was on the road to full recovery failed to end the volatility in the US stock markets yesterday. US share prices fell again towards the end of the session, with the Dow Jones Industrial Index ending down 166.08 points to record its eighth successive trading day decline. The Nasdaq and the S&P slipped to new six-year lows.
The mixed reaction on Wall Street to Mr Greenspan's testimony indicated a disconnection between the US markets and the economy, with stocks being pummelled over corporate frauds and reduced earnings forecasts, while economic growth picks up apace.
Much of the sell-off in the last hour was caused by rumours that the giant chip-maker Intel was about to announce a lowered earnings forecast and a new round of lay-offs.
Normally it would be enough for the Fed chairman to give an upbeat assessment of future growth to rally the markets. For a time yesterday it did appear that he had calmed the frazzled nerves of traders, who have seen the major indices fall to new lows in the last week.
As he began speaking to the Senate Banking Committee at 10.30 a.m. the Dow had plunged 200 points. By the time he ended the Dow had given most of this back. Then an hour before closing it plunged steeply again.
Mr Greenspan blamed "infectious greed" in the business community for market setbacks and called for strong action against executives who sought ways to "harvest" stock market gains.