Stocks fell today after Federal Reserve Chairman Alan Greenspan incited a new burst of investor concern over a potential interest-rate hike by the U.S. central bank.

In testimony to the U.S. Senate Banking Committee today, Greenspan said that the American economy seems to have turned the corner, and the threat of deflation is over. More important, he also said that the U.S. banking system is strong and able to handle higher interest rates. Greenspan’s comment contravenes a comment made last week by one of the state Fed governors that the central bank isn’t about to choke off burgeoning economic growth.

Greenspan prompted a second round of panic over the central bank’s next move on interest rates. Broad-based selling hit North American markets soon thereafter.

The Toronto Stock Exchange S&P/TSX composite index dropped 99.84 points, or 1.15%, to 8,602.98, its lowest closing in three weeks.

The materials sector, which includes the big gold companies, was the biggest loser. It fell 2.44%. A drop in commodity prices knocked gold stocks down 4.45% — its lowest level since early February.

The information technology sector came second with a 2.36% slide. A disappointing forecast from Lucent Technologies Inc. started the charge out of a tech sector. Nortel Networks Corp. fell 39¢, or 5%, to $7.25, while Research In Motion plunged $6.22, or 4.4%, to $134.40.

South of the border, stocks were similarly hard hit. The Dow Jones industrial average dropped 123.35 points, or 1.18%, to 10,314.50. The S&P 500 dropped 17.67 points, or 1.56%, to 1,118.15. The tech-heavy Nasdaq composite index fell 41.80 points, or 2.07%, to 1,978.63.