Mixed Day Waiting for Fed’s Act
Key indexes finished mixed Tuesday but more stocks rose than fell as Wall Street struggled for direction ahead of the Federal Reserve’s meeting next week.
In the bond market short-term yields fell further, and long-term yields inched up after the government’s disappointing report on first-quarter worker productivity.
The Dow Jones industrials eased 51.66 points, or 0.5%, to 10,883.51, the fourth loss in five sessions, as the 11,000 mark again proves to be a barrier for the blue-chip index.
But the Nasdaq composite index rose 25.20 points, or 1.2%, to 2,198.77 as semiconductor and computer networking stocks rose ahead of Cisco Systems’ quarterly earnings report, released after regular trading ended.
Cisco’s operating results slightly beat estimates, but the company reported a massive net loss as it wrote down the value of excess inventory. Cisco shares, which rallied $1.13 to $20.38 in regular trading, fell to $19.90 in after-hours activity.
In the broad market Tuesday, winners edged losers by 21 to 17 on Nasdaq and by 16 to 14 on the New York Stock Exchange. Trading volume was moderate.
Some analysts were impressed by the market’s strength, especially in the wake of the downbeat productivity report.
The government said worker productivity fell at a 0.1% rate in the first quarter, the first decline in five years. The report, though not entirely unexpected, raised fears about inflationary pressures in the economy.
Productivity gains had helped hold inflation to a minimum in the late 1990s.
Long-term Treasury bond yields rose modestly Tuesday as traders registered their concern about inflation’s trend.
The 10-year T-note yield ended at 5.24%, up from 5.19% Monday.
But shorter-term yields continued to slide as traders bet that the Fed, which meets Tuesday, will cut its key short-term lending rate for a fifth time this year.
The six-month T-bill yield slid to a new two-year low of 3.69% from 3.72% Monday.
Though the central bank may lower short-term rates further, the productivity report “increases the likelihood that the Fed will have to reverse course next year,” raising rates to contain inflation, Henry Willmore, chief U.S. economist at Barclays Capital, told Bloomberg News.
Among Tuesday’s market highlights:
* Financial stocks remained under pressure on concerns about loan losses and weaker borrowing in the struggling economy. American Express fell $1.93 to $41.30 after Morgan Stanley downgraded the stock.
J.P. Morgan Chase fell $1.45 to $47.75, Bank One lost 94 cents to $37.46 and Northern Trust fell $1.49 to $64.71.
* Chip stocks were strong, led by PMC-Sierra, up $4.79 to $44.10; Vitesse Semiconductor, up $2.60 to $36.25; and Broadcom, up $2.24 to $44.53.
But among personal computer stocks, Dell lost $1.08 to $24.83 after announcing new job cuts.
Dell rival Compaq fell 27 cents to $16.83 and Apple Computer eased 39 cents to $24.57.
* Among blue chips, 3M fell $1.54 to $116.36. Chief Executive James McNerney said at 3M’s annual meeting that there are “no signs” the global economy will turn around any time soon.
* Utility and energy-trading stocks were weak. Enron fell $1.93 to $56.11, Orion Power lost $1.04 to $28.76 and NRG Energy fell $1.64 to $31.07.
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Market Roundup: C7, C8
