Fed Effect Fades; Nasdaq Up 0.1%
The Fed Effect faded on Wall Street on Wednesday as worries about the gloomy economic environment overshadowed hopes the Federal Reserve’s rate cuts can help spur a rebound.
“You get these fights with the bulls and the bears,” said James Volk, co-director of institutional trading at D.A. Davidson & Co. “There are a number of people that are bullish about the economy turning around ... and there’s another group that thinks there’s no reason for this buoyancy in the market because it’s still way, way premature.”
The market initially built on Tuesday’s rally, when the Fed’s 10th interest-rate cut this year sent stocks soaring to their highest levels in about two months. But momentum faded toward the end of Wednesday’s session.
The technology-laden Nasdaq composite index, buffeted early in the session by disappointing results and a discouraging forecast from wireless telecommunications firm Qualcomm, finished with a gain of 2.45 points, or 0.1%, at 1,837.53.
The Dow Jones industrial average slipped 36.75 points, or 0.4%, to 9,554.37. At its session high of 9,644.12, the blue-chip index had erased all of its post-Sept. 11 losses.
The broader Standard & Poor’s 500 index fell 3.06 points, or 0.3%, to 1,115.80.
Winners and losers were about even on the New York Stock Exchange, while decliners led advancers 7 to 6 on Nasdaq. Trading was active.
Hewlett-Packard dragged down the Dow after HP and Compaq Computer stood firm on their plans for a $21-billion merger, even as pressure mounted from Hewlett and Packard family members to cancel the deal. Hewlett shares slipped 63 cents to $19.18. Compaq’s stock sagged 51 cents to $7.99.
Interest-rate-sensitive financial stocks such as J.P. Morgan Chase, up $1.05 at $38.59, and American Express, up $1.12 at $31.68, underpinned the Dow.
Stocks have surged in recent weeks as investors put aside their current economic woes, hopeful that the Fed’s rate reductions and a hefty fiscal stimulus package can help the economy spring back by the middle of next year.
Investors got encouragement from the latest key economic report, which showed productivity rose more strongly than expected in the third quarter as firms cut workers’ hours at the fastest pace in 10 years. The government data suggested companies are adjusting to the slowdown in economic growth.
Wireless-related stocks were buffeted after Qualcomm, which holds the patent for a popular cellular technology, reported earnings that missed forecasts. It also said profit for the current fiscal year would be at the low end of already reduced estimates, citing the global economic slowdown.
Nevertheless, Qualcomm still managed to erase its early loss to gain 38 cents to $55.11. The American-traded shares of Swedish mobile phone giant Ericsson slipped 16 cents to $4.73, while the shares of Finnish rival Nokia dropped 86 cents to $22.20.
Heavyweights such as networking giant Cisco Systems, which gained 46 cents to $18.93, helped bolster the Nasdaq market.
Stocks probably will remain in a trading range in the very near future as investors search for solid evidence that a recovery is at hand, analysts said.
“It’s usually a time when traders tend to take their gains, because there’s nothing left for the short term to look forward to,” said A.C. Moore, chief investment strategist at Dunvegan Associates.
Market Roundup: C7, C8
