FINANCIAL MARKETS : Stocks Fall as Fed Stands Pat on Rates; Dow Tumbles 23.55
The Federal Reserve’s decision to leave interest rates alone for now failed to prevent another stumble for Wall Street on Tuesday. Stocks were dragged down by other considerations. Bond yields rose slightly.
The news that the Fed’s monetary policy meeting had produced no surprises gave stocks a brief boost, but the effect was fleeting and the modest gains quickly disappeared from the major market indicators. The Dow Jones industrial average finished at 3,767.15, off 23.55 and near its lowest level of the day. Broad market indicators also sagged.
Advancing and declining issues were almost equal in number on the Big Board, where 325.53 million shares were traded, up from Monday’s volume of 271.69 million shares.
The meeting of the Fed’s policy committee the center of investors’ attention. Although it was widely assumed that the panel would refrain from raising rates for a seventh time this year, the markets were not certain of that until the meeting was over.
Word of the Fed’s decision prompted a muted reaction in the bond market, where the yield of the Treasury’s 30-year bond rose to 7.84% from 7.83% the day before. The bond’s price, which moves inversely to the yield, was down 1/8 point, or $1.25 per $1,000 invested.
In the absence of broad economic news, events affecting individual issues influenced trading.
Developments involving stocks traded on the Nasdaq seemed to balance each other. The Nasdaq composite edged up 0.62 to 728.51.
Software industry leader Microsoft said it probably will ship its latest version of Windows next August, rather than in the spring as previously planned.
Among the market highlights:
* Microsoft’s announcement of the delay in marketing the new Windows operating system sent the company’s stock down 2 3/4 to 59 7/8.
The impact of Microsoft’s announcement was offset by welcome news from Intel, which moved to solve problems involving the flawed Pentium chip. Intel’s stock surged 3 7/16 to 61 1/4, and Intel’s promise to replace the chips free of charge, no questions asked, also helped other computer stocks. Dell Computer rose 1 to 38 3/8 on Nasdaq.
In Mexico, investors snapped up stocks after the government dropped the peso’s floor in relation to the dollar. But the rally lost steam on news from Chiapas that police and army troops were moving into recently captured rebel territory, and the Bolsa finished 43.06 points higher at 2,274.17.
In New York, however, Mexican stocks stumbled on news of the devaluation. Telefonos de Mexico fell 2 1/2 to 46; Grupo Televisa fell 3 3/8 to 35 1/2.
* Glaxo’s American depository receipts rose 1 to 20 3/4 after the British drug maker said it expects the U.S. patent on its Zantac ulcer medication will be extended.
* Monsanto tumbled 4 to 68 7/8 on news that it will buy Merck’s Kelco business. Merck gained 3/8 to 38 5/8.
Most other overseas stock markets closed higher. Tokyo’s Nikkei 225-share average gained 136.13 points to close at 19,406.98. In London, the Financial Times 100-share average rose 23.7 points to 3,058.1. Germany’s 30-share DAX average ended at 2,079.93, up 3.99 points.
