WASHINGTON (AP) -- Federal Reserve Chairman Alan Greenspan said Monday that if the high-flying stock market loses some of its zip, that will help slow the supercharged U.S. economy to a more sustainable pace.
But in echoes of warnings he gave Congress last month, Greenspan served noticed that the central bank would help that process along with more interest rate increases if necessary.
His remarks to an audience of hundreds -- who sang ''Happy Birthday, Mr. Chairman'' to the man who turned 74 on Monday -- helped to send blue-chip stocks plunging on Wall Street. The Dow Jones industrial average, after gaining 505 points last week, fell 197.70 points on Monday to close at 10,170.50.
Many analysts said it was significant that Greenspan chose a conference on the ''New Economy'' at Boston College to elaborate on concerns that America's record-breaking economic expansion could be ended by a resurgence of inflation unless growth slowed to a more sustainable level.
He said red-hot consumer demand, which has been met increasingly by imported goods, had driven the nation's trade deficit to unsustainable levels.
In addition, he said, the lowest unemployment rates in 30 years raised the prospect that workers will begin to demand much higher pay. Such demands ''would intensify inflationary pressures or squeeze profit margins, with either outcome capable of bringing our growing prosperity to an end,'' Greenspan said.
Private economists viewed Greenspan's remarks as a clear signal that the central bank, which has already boosted interest rates four times since last June, is prepared to do more. The central bank has pushed the federal funds rate, the interest that banks charge each other, up a full percentage point to 5.75 percent.
NEW YORK (AP) -- The Nasdaq composite index barreled past 5,000 for the first time today as investors once again snapped up shares of technology stocks. The Dow Jones industrials fell sharply due to a steep drop in Procter & Gamble.
In the first hour of trading on Wall Street, the Nasdaq moved as high as 5,006.78 before slipping back below its new milestone. It was trading up 87.96 at 4,992.81.
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