The Dow Jones industrial average declined 115.64 points, or 1.09%, to 10,456.91. The broader Standard & Poor's 500 index was off 13.21 points, or 1.12%, to 1,170.34. The Nasdaq composite index lost 33.65 points, or 1.6%, to 2,070.63.
Some of the market's trouble came from Greenspan, who suggested that foreign demand for dollar-denominated assets could soften eventually due to the swelling current account deficit. Speaking in front of central banking peers in Frankfurt, Greenspan said that foreign appetites for U.S. dollar-denominated assets must wane at some point, and that he thought foreign investors may seek more diversity. An off-handed comment by Greenspan on anyone not already hedged against rising rates being "obviously desirous of losing money," however, captured the hawkish imagination of the bond market and drove particularly short-dated yields sharply higher, says Action Economics.
In turn, the U.S. dollar approached a four-year low vs. the yen earlier, and a record low vs. euro. Earlier this week, the euro reached an all-time trading high of $1.30 against the dollar.
"The main story of the day was Mr. Greenspan and the fact that the price of oil rose over $2," says Peter Cardillo, chief strategist for S.W. Bach. "Greenspan set the stage for some major profit-taking."
There was little other economic news to guide the market on Friday.
In the energy markets, the December NYMEX crude contract expired with a bang, settling up a whopping $2.22 at $48.44 per barrel, after ranging between $46 and $48.90. Trade was choppy throughout the session, as the market again returned its focus to winter heating supplies, says Action Economics. Historically low heating oil stocks in all major global consuming markets combined with news that China has ramped up diesel fuel imports to levels last seen in 1999, pushed the entire NYMEX complex higher, says Action Economics.
Up ahead on the economic calendar, Tuesday brings the October existing home sales, followed by the final consumer sentiment report from the University of Michigan, and October durable goods orders and new home sales.
On the earnings calendar, Monday brings earnings reports from Campbell Soup (CPB
), and Toys R Us (TOY
), followed by H&R Block (HRB
) and H.J. Heinz (HNZ
) on Tuesday, and Bayer (BAY
) on Thursday.
Among the sectors moving Friday, interest rate-sensitive groups such as homebuilders, investment banking, and asset managers fell as Treasury yields surged on comments from Greenspan.
In the tech sector, Goldman Sachs downgraded the semiconductor equipment industry to cautions from neutral on expectations for new cyclecal lows, driven by continued disappointing fundamentals over the next several quarters and excess manufacturing capacity concerns.
However, bucking the trend Friday was Autodesk (ADSK
), which posted third-quarter earnings per share of 38 cents, vs. 20 cents a year ago (pro forma), on a 28% revenue rise. It set a 2-for-1 stock split. The software maker sees fourth-quarter EPS of 25 cents to 28 cents (post-split) on revenue of $335 million to $345 million. The stock rose 5.9%.
Analysts believe business database software outfit Oracle (ORCL
) ) is going to get a majority of shares tendered of PeopleSoft (PSFT
). The deadline for Oracle's $8.8 billion takeover bid for PeopleSoft is Friday midnight. Oracle shares fell 1.8%; PeopleSoft rose 1.09%.
Shares of footwear maker Nike (NKE
) fell by 2.6% after CEO and co-founder Phil Knight announced his resignation. Analysts at Goldman Sachs said, however, that investors should "buy on weakness," and that Knight's resignation did not negatively impact Nike.
Software maker Novell (NOVL
) posted a quarterly net profit vs. a loss a year ago thanks to stronger sales of open-system operating software Linux. The stock fell by 7.7%.
Drug stocks were pressured after a U.S. Food and Drug Administration official said Abbott Laboratories' (ABT
) weight-loss drug Meridia and Pfizer's (PFE
) arthritis treatment Bextra required more scrutiny to determine whether they belonged on the market. The official also raised similar questions about other drugmakers' drugs. Abbott's shares fell by 1.4%, while Pfizer fell 2%.
In other stocks news, media and entertainment giant Walt Disney (DIS
) said profit rose 24% thanks to more advertising at ESPN and ABC television networks. The stock rose by 1%.
Sirius Satellite Radio (SIRI
) shares jumped 10% after the company named former Viacom president Mel Karmazin as its chief executive officer.
Clothing retailer Gap (GPS
) posted 1% higher earnings thanks to improved profit margins. But weakness at its Old Navy and international Gap stores kept a lid on gains.
Food company J.M. Smucker (SJM
) reported higher profit as stronger Jif peanut butter and Smucker's jelly sales helped offset higher raw material costs. Shares dropped by 3.5%.
Treasuries skidded in price on Friday, sending the 10-year yield 10 basis points higher to 4.21%. Greenspan's off-handed comment on anyone not already hedged against rising rates being "obviously desirous of losing money" drove short-dated yields sharply higher, says Action Economics. The 2-year note nearly cleared 3.0%, a level not seen in nearly 2-1/2 years. Informa Global Markets called this "one of the most aggressive statements by the Chairman since the 'irrational exuberance' comment back in December 1996."
The dollar weakened on Greenspan's comments, breaking above the $1.30 per euro mark.
Eurpoean markets finished Friday's session with losses. London's Financial Times-Stock Exchange 100 index was off 44.5 points, or 0.93%, to 4,760.8 on position squaring before the weekend. AstraZeneca was lower as an FDA medical reviewer said yesterday that current FDA procedures may not prevent harm to patients from drugs including AstraZeneca's Crestor cholesterol reducer, Glaxo's Serevent asthma drug, and Roche Holding AG's Accutane acne pill. GlaxoSmithKline was also lower. EMI Group was higher after company said music sales rose in the past two months.
Germany's DAX index eased 43.79 points, or 1.05%, to 4,134.89
even though oil futures prices were higher. HVB Group rose following a newspaper report that the company may cut between 2,000 and 3,000 German jobs. Schering was lower after a U.S. health official said drugs from companies including GlaxoSmithKline and AstraZeneca need closer safety reviews.
In Paris, the CAC 40 index lost 31.61 points, or 0.83%, to 3,798.78. Cap Gemini was higher after the company denied a press report saying it plans to sell its North American consulting unit. Dexia was higher after company said it is in talks about a possible partnership with Italy's Sanpaolo IMI.
Asian markets finished mixed on Friday. Japan's Nikkei 225 added 0.42 of a point to close at 11,082.84 as gains in tech stocks were countered by losses in financials. Technology names rose following optimistic comments by Intel on its operating performance for 2005, with Advantest climbing 1.53% while Tokyo Electron gained 1.22%. But automakers extended losses from Thursday, with Honda Motor slipping 0.78% while Toyota Motor shed 0.25% on news that it would recall over 540,000 vehicles to fix faulty brake lights. Starbuck Japan jumped 2.37% after it posted record first-half profit on Thursday.
In Hong Kong, the Hang Seng index declined 12.14 points, or 0.09%, to close at 13,787.68 as investors cashed in profits before the weekend.