FINANCIAL MARKETS : Stocks Finish Mostly Lower Ahead of Fed
Stocks closed mixed but mostly in negative territory Monday as the market churned ahead of today’s Federal Reserve Board meeting.
The dollar, meanwhile, finished modestly higher, continuing to stabilize after last week’s plunge.
The Dow Jones industrials added 5.78 points to 4,769.93, but most broad stock indexes ended with losses, as losers topped winners by 13 to 9 on the New York Stock Exchange.
Trading was light, with some market players observing the Jewish New Year.
“It was a tough day to get anything cooking,” said Joseph Barthel, chief investment strategist at Fahnestock & Co.
The general tone was depressed by widespread belief that the Fed won’t cut short-term interest rates today, and by another batch of corporate earnings disappointments in the technology sector.
Fresh selling of tech stocks helped drive the Nasdaq composite index down 7.24 points to 1,046.15.
“I would think that this continued profit taking in the high-techs will weigh on the broader market for some time,” said Alfred E. Goldman, analyst at A.G. Edwards & Sons in St Louis.
Goldman and other market pros noted that many investors still have huge paper gains in tech stocks this year and that pressure to cash in some of those gains may grow intense if earnings jitters rise.
The good news for stocks Monday was that the dollar’s slide seemed arrested. After weeks of rallying, the dollar suddenly plunged last week as traders tested world central banks’ resolve to defend the currency.
On Monday the dollar inched up to 100.47 Japanese yen in New York from 100.05 on Friday. Traders said the Bank of Japan entered the market to buy dollars, helping to boost the currency.
The dollar also rose to 1.4335 German marks from 1.4228 on Friday.
But the president of the German central bank, Hans Tietmeyer, unnerved some currency traders when he said that central bank intervention to support the dollar was a weapon that had limited use unless the United States addresses its federal budget deficit.
That comment could be a warning that coordinated central bank buying of dollars may not continue.
Meanwhile, the bond market had a mixed day. Short-term yields rose as traders concluded no Fed rate cut is forthcoming. But long-term yields were mostly steady, underpinned by the dollar’s resilience.
The 30-year Treasury bond yield closed unchanged at 6.58% after rising to 6.61% at midday.
Among Monday’s highlights:
* Tech stocks were undercut by computer chip maker Advanced Micro Devices’ warning of lower third-quarter earnings, which it blamed on heavy price cutting for 486-generation computer chips. Those chips are rapidly being supplanted by Intel’s faster Pentium-class chip.
AMD shares fell 2 to 31 1/8, and many other chip stocks also fell. Micron Technology dropped 3 3/4 to 82, Cypress Semiconductor lost 1 7/8 to 35 7/8 and Texas Instruments sank 1 1/8 to 78 5/8. But Intel was off just 1/2 at 60 after falling as low as 58 7/8.
* In another tech disappointment, Western Digital shares sank 1 3/4 to 16 after the Irvine-based maker of computer disk drives said fiscal first-quarter earnings will be “substantially below” Wall Street expectations of 39 cents a share because of competition.
Other tech stocks losing ground included Read-Rite, down 3 1/8 to 36 1/8; IBM, down 1 1/8 to 92 3/4, and Novell, off 5/8 to 18 1/4.
* Many industrial stocks also were under pressure. Trinova fell 1 3/8 to 34 1/4, Alcoa lost 1 1/4 to 51 7/8 and Caterpillar sank 3/4 to 58 1/8.
* Rising drug and consumer-product stocks helped support the market, as investors continued to seek refuge in those shares.
Johnson & Johnson rose 1 1/8 to 73 7/8, Schering-Plough gained 1 1/4 to 51 5/8 and Nike leaped 4 5/8 to 110.
Overseas, Tokyo’s Nikkei-225 index eased 147.50 points to 17,566.43, continuing its downtrend. In Mexico City, the Bolsa index also fell again, dropping 56.31 points or 2.2% to 2,458.59 on interest-rate worries.
In U.S. commodities trading coffee prices plummeted to 16-month lows after rains soaked Brazil’s coffee-growing regions, eliminating the chances of a repeat of last year’s drought.
