Wall Street Quiet on Eve of Today’s Fed Meeting
Anxiety over interest rates made for a quiet Monday on Wall Street, with investors reluctant to make any big moves on the eve of today’s Federal Reserve meeting. Blue chips rose moderately, while technology stocks drifted lower, giving the Nasdaq composite index its fourth straight decline.
The bond market was equally quiescent. After a big surge Friday, bond yields inched lower in uncertain trading Monday.
Analysts say investors’ caution resulted from doubts about how big a rate cut the Fed will make today--if it makes one at all.
“Everybody’s just on the sidelines waiting to see what the Fed does,” said Stephen Carl, head of equity trading at William Capital Group.
The Dow Jones industrial average closed up 56.02 points, or 0.5%, at 10,877.33 on gains that mostly came late in the session.
Broader indexes were mixed. Nasdaq slipped 25.51 points, or 1.2%, to 2,081.92, giving it a 116.85-point or 5.3% loss from the last four sessions. But the Standard & Poor’s 500 index rose 0.3%.
Trading activity was muted throughout the session, with the New York Stock Exchange and Nasdaq Stock Market experiencing their slowest day of the year. Last Friday previously held that mark. Winners led losers 8-7 on the NYSE, while losers outpaced gainers by 11-8 on Nasdaq.
In the bond market, the yield on the benchmark 10-year Treasury note slipped to 5.43% from Friday’s close of 5.45%. The 10-year note’s yield surged Friday to its highest since December in the wake of stronger-than-expected economic data.
Although most analysts still expect the Fed to make its fifth interest rate cut of 2001 at today’s meeting, there are doubts about whether the reduction will be the half-point cut that has been anticipated.
The central bank has already cut its key short-term rate to 4.5% from 6.5% at the start of the year to stimulate the sluggish economy, but some recent data have indicated business may not be as weak as thought.
The problem for the stock market: In the absence of strong corporate earnings, investors have become increasingly dependent on the Fed’s cuts for catalysts to rally stocks. Stocks spent most of last week in a narrow trading range in anticipation of the Fed’s next move.
“Not having the 100% certainty that the Fed will lower interest rates as much as many want is what’s causing this,” said Steven Goldman, market strategist at Weeden & Co. “But overall, the market remains on good footing.”
The latest Fed report released Monday showed further evidence that the economy slowed during the spring. Industrial production fell in April by a bigger-than-expected 0.3%, the seventh straight monthly decline, according to the report.
Technology stocks were especially weak Monday, reflecting the gradual selling since April’s big advance. Cisco Systems fell 48 cents to $18.57, Intel dropped 53 cents to $27.41 and Ariba slid 87 cents to $6.03.
Non-technology issues fared better, including banker J.P. Morgan Chase, up $1.20 at $47.64.
Bank stocks in general rose after SunTrust Banks surprised the market with a takeover offer for Wachovia, in an attempt to break up Wachovia’s merger dealt with First Union. The news raised expectations for more consolidation in the banking industry.
Alcoa, another Dow component, rose $1.03 to $41.30. Deutsche Banc Alex. Brown initiated coverage of the aluminum maker Friday with a “market perform” rating.
Energy and utility stocks were strong. The Dow utility index rose 1.1%. The S&P; international oil index added 1%.
Market Roundup C13, C14
