Why the NASDAQ and Dow Are Doing a Woody Allen

If these markets were a person, they'd be Woody Allen. Upon receipt of more good news about the soft landing Tuesday from the Commerce Department — retail sales dropped 0.3 percent in May and were revised down again for April, the first consecutive drop since the summer of 1998 — investors' neuroses kicked in. Suddenly, the worry wasn't that Alan Greenspan would raise rates again at month's end. It was that he'd already gone too far. Tech selling slid the NASDAQ down on the news, and financials did the same to the Dow. Consumers, the heroes of the expansion and the villains of the overheat, are closing their wallets. Have they opened the door to a recession, thanks to the Fed's prodding?

TIME senior economics reporter Bernard Baumohl doesn't see any signs that Greenspan got any more than he bargained for. "The markets are having a little panic about how much this slowdown will affect earnings," he said (although investors warmed up again in the afternoon when Greenspan announced that technology -- gasp! -- was good for productivity). "But right now, it doesn't look like any more than the soft landing, from 5 percent growth to about 3.5 percent, that the Fed has been trying to engineer." In fact, says Baumohl, there are some on the Fed's Open Market Committee who feel one more rate hike is still necessary. Greenspan, says Baumohl, is not among them. "There's no sign of any sharp drop-off in economic activity," he says. "On the other hand, Greenspan seems satisfied that his tightening has had a lasting effect. He's likely to stand pat for the rest of the year."