Washington: With US stock prices in virtual free fall, Federal Reserve Chairman Alan Greenspan will try on July 16 to find the right words to calm jittery investors spooked by a series of big corporate scandals.

Greenspan will appear before the Senate Banking Committee at 10:00 am (14:00 GMT) to deliver the Fed's semi-annual report on monetary policy and his usual brief economic forecast.

The market turmoil is largely attributed to a series of corporate accounting scandals involving Enron, Arthur Andersen, Xerox, WorldCom and other companies that have admitted inflating their profits.

"The risk is if you have continued financial distress, clearly that's going to hurt consumption and investments and would trigger a new recession," said John Silvia, chief economist of Wachovia Securities.

Consumption is the main engine of growth for any economy, he said.

Global stocks tumbled on July 15 amid deepening gloom about the crisis of confidence in US companies, but a spectacular late snapback on Wall Street after an early tailspin averted a meltdown.

On Wall Street, the Dow Jones industrials rebounded from a loss of more than 400 points, ending down a modest 45.34 points (0.52 per cent) at 8,639.19.

The NASDAQ composite, shaking off its own steep declines, managed to close with a small gain of 8.97 points (0.65 per cent) to 1,382.47.

The broad-market Standard and Poor's 500 index also snapped back, ending with a loss of just 3.47 points (0.38 per cent) at 917.92.

The plunge came after the blue-chip index slumped nearly 700 points last week and threatened to crash through its September 21 low, just after the terror attacks on the United States.

The markets were also pressured by the Euro reaching parity with the Dollar.

Since early July, consumer confidence has been off sharply, as calculated by the University of Michigan. According to Silvia, the calculations show there is a real danger of putting a break on household spending in the near future.

Some 80 million Americans have their retirement funds tied up in the stock market. Those 80 million are expected to rein in their spending to make up for value lost from their retirement portfolios.

In the face of such economic turmoil, Greenspan will likely "reassure investors that Fed policy will counter any drag from falling equity prices and continue to foster a return of full employment," said JP Morgan economists in a research note.

He could also say, as he has in his congressional testimony since February, that "the near-term outlook is clouded, by weak stocks prices, soft business investment and uneven foreign growth," according to David Gilmore, partner at Foreign Exchange Analytics.

Richard Rippe, chief economist, Prudential Securities, said, "I think he will reaffirm the Fed's intention to remain accommodative (until they) achieve a sustainable growth rate in final demand."

The principal interest rate manipulated by the Fed, the overnight rate, has been at 1.75 per cent since December, its lowest level in 40 years.

For Sal Guatieri, an economist at Bank of Montreal in Chicago, "the drop in consumer sentiment raises the possibility of the Fed easing rates at the August 13" meeting of the Federal Open Market Committee, where interest rate actions are decided.

Besides delivering his report on the health of the US economy, Greenspan will surely take advantage of the intense media coverage that usually surrounds such hearings, to reassure US investors and the public that the US financial system remains solid despite the recent scandals, said Silvia.

According to economists, Greenspan could also chide the markets for irrational pessimism, the flip side of the "irrational exuberance" term he coined when stocks were soaring in 1996 during the "new" economy.