Trading Is Light as Investors Wait for Fed
Action on Wall Street slowed sharply Monday as investors awaited Federal Reserve policymakers’ meeting today.
In commodities trading crude oil futures rose above $25 a barrel. In currency markets the dollar resurged against the yen after recent weakness.
The Dow Jones industrials ended down 29.48 points, or 0.3%, at 10,577.75. The Nasdaq composite inched up 8.76 points, or 0.5%, to 1,877.06.
Winners topped losers by 18 to 14 on the New York Stock Exchange and by 19 to 16 on Nasdaq. But trading volume was light.
Smaller stocks showed more strength than blue chips: The Standard & Poor’s small-cap 600 index gained 0.9%. It’s up 6% this year, compared with a 1.5% gain for the blue chip S&P; 500.
The Fed is expected to leave its benchmark short-term interest rate unchanged today at a 40-year low of 1.75%.
But given the surprising strength of economic data in recent months, the central bank also is expected to shift its “bias” on rates to neutral--meaning that it believes the risks now are balanced between further economic weakness and stronger-than-expected growth that could fuel inflation.
For the last year the Fed’s bias has been to assume that the major risk is of a weaker economy.
“People are nervous about the Fed raising rates” in the near future, Mark Bronzo, who oversees $2.9 billion at Groupama Asset Management, told Bloomberg News. If the Fed shifts to a neutral stance “it will not be interpreted positively” by investors, he said.
Other analysts, however, argue that markets already are braced for the Fed to change to a neutral stance. Still, stock and bond investors alike will be focusing on the language the Fed uses in its official statement (expected to be released about 11:15 a.m. PST) for clues as to how soon the central bank may begin raising rates.
Longer-term Treasury bond yields have risen sharply in recent weeks, in part on the assumption that the Fed will be tightening credit by mid-year. On Monday long-term yields were little changed. The 10-year T-note yield ended at 5.30%, down from 5.33% on Friday. The yield hit 5.41% on Thursday, the highest since June.
In other trading, oil prices continued to rise after the Organization of the Petroleum Exporting Countries on Friday said it had no plans to boost production soon. Near-term crude futures in New York gained 60 cents to $25.11 a barrel, the highest in nearly six months. The price was $19.84 a barrel at year’s end.
Oil’s advance helped boost energy stocks. ChevronTexaco added 56 cents to $90.36 and Amerada Hess rose $1.17 to $75.91.
Buyers also were attracted to shares in such industries as biotech, health maintenance organizations and entertainment.
Gainers in biotech included Amgen, up $1.07 to $62.48, and Genentech, up $1.86 to $53.31.
Among HMOs, Anthem rose $1.40 to $58.30 and Coventry Health gained $1.56 to $27.30.
In the entertainment sector Viacom class B shares gained $1.48 to $51.02 and Hispanic Broadcasting surged $2.55 to $31.65.
Gold mining stocks also were strong, after recent profit-taking. Goldcorp jumped $1.12 to $15.65.
In currency markets the dollar jumped to 131.33 yen in New York from 129.18 on Friday, the biggest one-day gain in 11 months, as more traders shifted back to the dollar after recently favoring the yen.
Analysts said rising conviction about a U.S. economic recovery, while Japan continues to struggle, may encourage Japanese investors to invest in the United States.
The Nikkei 225 stock index, which has surged in recent weeks, fell 1.3% to 11,498.38 on Monday.
Market Roundup, C8-9
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