Stocks built on losses from yesterday when Greenspan cautioned in the first of two days of congressional testimony that deflation, an economically dangerous long-term slide in prices, is still a possibility. Greenspan also said the economy is poised for strong growth in the second half of the year, which, while a good thing, could mean that interest rates are headed higher.

“People are concerned that if rates go up, this sort of nascent (economic) recovery could be in jeopardy. It is not a major fear, but given the advances the market has made since March, the tendency to take profits is out there,” said Richard Dickson, senior market strategist at Lowry’s Research Reports in Palm Beach, Fla.

The Dow Jones industrial average closed down 34.38, or 0.4 percent, at 9,094.59, according to preliminary calculations. The Dow lost 48.18 yesterday.

The Nasdaq composite index declined 5.24, or 0.3 percent, to 1,747.97. The Standard & Poor’s 500 index fell 6.33, or 0.6 percent, to 994.09.

The Labor Department reported that consumer prices increased by a modest 0.2 percent in June. The advance in the Consumer Price Index, the closely watched gauge of inflation, followed a 0.3 percent decrease in April and flat prices in May.

The 0.2 percent rise matched analysts’ forecasts and could alleviate concerns the economy is poised for deflation, although that wasn’t apparent in today’s trading.

Analysts said quarterly earnings results, which companies began releasing in earnest this week, contributed to the market’s two-day decline. Investors were hoping companies would raise third-quarter and yearly outlooks, and had already factored strong second-quarter profits into higher stock prices.

Earnings are mostly exceeding or meeting expectations, said Brian Belski, fundamental market strategist at US Bancorp Piper Jaffray, but not to the degree they did following the first quarter .

Since the lows made on March 11, the Dow has gained nearly 21 percent, the Nasdaq 37.5 percent and the Standard & Poor's index 24.2 percent.

“Given the fact that earnings are not blowing away numbers, people are a little concerned that prices have gotten ahead of themselves,” Belski said.

Citigroup fell $1.31 to $45.52 on news that chairman Sanford I. Weill is giving up his job as chief executive after the 2006 annual meeting. Citigroup has been defending itself against allegations of conflicts of interest in its investment banking business, mishandling initial public offerings and misleading the public in its dealings with Enron and WorldCom.