Dow Off on Eve of Fed Interest Rate Decision
Major stock indexes retreated Tuesday with few investors willing to bid stocks higher until the Federal Reserve Board confirmed expectations that it would hold the line on interest rates for now.
The Dow Jones industrial average fell 9.60 points to 5,720.38, recovering from an early loss of nearly 35 points on a late-session rebound led largely by oil stocks in the blue-chip barometer.
Broader market measures slipped too, with the technology-heavy Nasdaq market losing the most ground after the latest in a series of negative earnings outlooks from computer-related businesses.
Yields rose after a government reported much stronger-than-expected new-home sales and a fairly high figure from the Conference Board’s index of leading economic indicators.
The two reports cast some doubt about the conventional wisdom that the Fed will leave short-term interest rates alone.
The yield of the Treasury’s 30-year bond rose 0.03%age point to 6.94%.
Mostly, though, investors were waiting for today’s conclusion of a two-day meeting by the Fed’s policy makers, hoping there’ll be no surprises after the optimistic rally Monday, when the Dow industrials posted a 75-point gain, the biggest advance in more than three months.
Monday “was probably too much, representing the hope that the Fed will not raise rates this week,” said A. Marshall Acuff Jr., market strategist at Smith Barney. “With the Fed decision right in front us, investors rightly are going to sit on their hands. There are probably more people interested in their four-day weekends than stocks.”
Advancing issues outnumbered decliners by a 10-to-9 margin on the New York Stock Exchange, where NYSE volume totaled 387.46 million shares as of 4 p.m., exceeding Monday’s tally.
The NYSE’s composite index fell 0.69 to 361.01 and the Standard & Poor’s 500-stock index fell 2.27 to 673.61.
The Nasdaq composite index fell 6.30 to 1,191.15 as the latest indications of weak computer-industry profits helped halt a powerful three-day rally.
Digital Equipment announced that its earnings for the just-ended quarter will be well below expectations due to trouble in its personal computer business and slow sales in Europe. The company also announced plans to cut 7,000 jobs in a $475-million restructuring. Digital plunged 5 to 40 7/8.
Among market highlights:
* Among software makers, Sybase said it expects show a loss for the quarter, and Borland International quantified its expected loss and announced that its chief executive has resigned. Sybase fell 1 1/4 to 18 3/4 and Borland fell 1 3/8 to 7 7/8.
* The technology sector was weak. Although Motorola rose 1/4 to 64 3/4 and Cisco Systems rose 3/8 to 58 3/4, Hewlett Packard fell 4 1/8 to 97 1/2, IBM was off 1 1/2 to 100, Compaq Computer dipped 1/4 to 49 3/4 and Intel slid 3/8 to 74 3/4.
* Some brokerage houses downgraded two stocks that are components of the Dow Jones index. Minnesota Mining & Manufacturing lost 2 1/2 to 68 7/8 after Prudential Securities lowered its rating on the broadly-diversified company. Also, Procter & Gamble fell after a downgrade by Merrill Lynch. The stock lost 1 1/2 points to 89 1/8.
Overseas, Tokyo’s Nikkei stock average fell 0.5%, Frankfurt’s DAX index rose 0.3%, and London’s FT-SE 100 rose slightly.
Oil prices fell on Tuesday on forecasts, later fulfilled, for a rise in U.S. stocks and the calling off of a threatened Norwegian oil workers strike. U.S. crude oil stocks were reported 3.15 million barrels higher in the week ended June 28.
The key August crude contract on the New York Mercantile Exchange settled 40 cents lower at $21.13 a barrel.
August gasoline fell 0.62 cents to 60.89 cents a gallon, while August heating oil shed 0.86 cent to 54.28 cents a gallon.
Market Roundup, D5
