Rally Eludes Dow Despite Move by Fed
Stocks fell modestly today, as the market failed to rally on the long-awaited move by the Federal Reserve to ease its grip on credit.
The Dow Jones average of 30 industrials, up about 20 points in the early going, closed with a 5.94 loss at 2,430.20.
Declining issues outnumbered advances by more than 2 to 1 on the New York Stock Exchange, with 481 up, 1,030 down and 453 unchanged.
Big Board volume totaled 133.98 million shares, against 130.19 million in the previous session.
The Fed earlier injected funds into the banking system, pushing down a key market interest rate, after Congress completed work on a budget pact. Lower rates typically spur investors to buy, but the move failed to inspire the market, which had long expected the action.
The oil-sensitive Dow Jones transportation index was also depressed, down 7.02 at 830.07 shortly before the close, mainly in response to rising oil prices. Costlier oil is bad news for transportation companies.
Oil for December delivery on the New York Mercantile Exchange was up $1.64 to $34.65 a barrel.
“Nobody’s going out of their way to buy or sell stocks today,” said Thomas Walsh, head of trading at Nikko Securities.
Analysts said the key factor in a morning blue chip rally that later faded was a move by the Federal Reserve to add cash to the banking system.
Economists see this as a clear sign that the Fed is lowering interest rates. Such an easing of credit make money cheaper to borrow and thus fights a slowing economy by helping companies grow.
“Any type of lower interest rates is already in the market,” said Thom Czech, chairman investment at Blunt Ellis & Loewi.
“People are now going to wait for the economic figures,” Czech said, referring to growth, personal-income, factory-order and employment figures due to be reported this week.
Among actively traded blue chips, Boeing dropped 5/8 to 45 1/2; International Business Machines 5/8 to 106; American Express 3/8 to 18 1/4, and Pepsico 3/8 to 23 3/8.
Merrill Lynch, which outlined plans for a corporate realignment, dropped 7/8 to 16 3/4.
Bond traders greeted the passage of the federal budget agreement by bidding prices of Treasury securities moderately higher today.
The price of the Treasury’s bellwether 30-year bond rose 5/16 point, or about $3.12 per $1,000 in face amount. Its yield, which declines as the bond’s price rises, fell to 8.74% from 8.77% late Friday.
