Markets Fall on Eve of Fed Rate Announcement
The stock market seemed to lose its nerve Tuesday on the eve of today’s expected interest rate announcement from the Federal Reserve, with most key indexes ending lower.
But the bond market was dead in the water. In commodities trading, oil prices rose even though OPEC’s chief suggested the cartel could raise production further this year. Natural gas prices hit a record.
On Wall Street the Dow industrials eased 38.53 points to 10,504.46 after surging 138.24 points on Monday. The Nasdaq composite lost 53.16 points, or 1.4%, after gaining 1.7% on Monday.
Losers topped winners by 23 to 17 on Nasdaq, though winners had a 16-to-13 edge on the New York Stock Exchange. Nasdaq volume was moderate, at nearly 1.5 billion shares.
Though the Fed is widely expected to leave its key short-term rate unchanged at 6.5% today, some investors apparently were hedging their bets Tuesday.
A muted report on June consumer confidence provided the latest sign that the Fed’s yearlong campaign to raise rates may be slowing the economy enough to keep inflation at bay.
But some economists say the Fed may opt to take out “insurance” by boosting rates at least one more time.
Because many investors have been assuming the Fed would stand pat, a rate hike today could be a shock to stock and bond markets. The Fed’s announcement is expected at 11:15 a.m. Pacific time.
One of the Fed’s worries has been oil prices, and they climbed again Tuesday. Near-term crude futures rose 43 cents to $32.06 a barrel in New York.
Organization of Petroleum Exporting Countries President Ali Rodriguez said global oil demand is expected to rise 1.6% in the second half of the year but should be met by last week’s decision by OPEC to boost production quotas.
“There should be no problem on the supply side, but if there is, OPEC will increase production,” Rodriguez told reporters after speaking at an energy conference.
But traders seem to be betting OPEC won’t do enough.
Upward pressure on oil prices also is coming from natural gas prices: Gas futures surged almost 3% to a record Tuesday on signs that production is falling short of demand for fuel that utilities use to generate electricity in summer and heat homes in winter.
Among Tuesday’s highlights:
* Profit-taking hit many technology and biotech issues, including National Semiconductor, down $5 to $63.50; Anaren Microwave, down $6.88 to $118; Xilinx, down $3 to $84.06; Celera Genomics, down $14.50 to $99.50; and Abgenix, down $10.38 to $122.19.
* The telecom sector also was weak, with Williams down $5.81 to $37.75 after analysts lowered their sales estimates for the firm’s voice and data traffic networks, which the company apparently can’t expand fast enough to meet demand.
Also in telecom, ADC Telecom lost $5.19 to $79.81, GM Hughes fell $7.38 to $88.88 and Corning slid $6.94 to $253.25.
* Utility stocks were sharply lower. American Electric Power slumped $1.44 to $31 and PG&E; lost 94 cents to $25.31.
* On the plus side, some investors snapped up beaten-down retailers. Home Depot jumped $2.44 to $49.56, Federated Department Stores rose $1.31 to $36.06 and Wal-Mart surged $3.06 to $56.81.
Airline and heavy-industry shares also attracted bargain-hunters. Delta Air Lines gained $2.69 to $53, Northwest Air shot up $3.25 to $31.88, Alcoa rose $1.06 to $29.94 and DuPont was up $1.13 to $46.25.
In foreign trading, Mexican stocks advanced 2.2% though the peso remained above 10 per dollar on election jitters. In Tokyo the Nikkei-225 index rebounded 2.1%.
Market Roundup, C9-C10
