Investors Show Caution Before Fed Chief’s Talk
The blue-chip Dow Jones industrial average and bond prices ended lower Monday, while the tech-laden Nasdaq rebounded from sharp losses last week.
Investors were cautious as they awaited a flood of corporate earnings and testimony to Congress this week from Federal Reserve Chairman Alan Greenspan. The Fed chief’s words will be followed closely for any hint about possible timing of an increase in interest rates.
U.S. Treasury bond prices dipped with traders wary of making any drastic moves in advance of Greenspan’s testimony to the Joint Economic Committee on Wednesday. The yield on the benchmark 10-year note rose to 4.39% from 4.34% on Friday.
Crude oil futures fell after the White House said Saudi Arabia had assured the Bush administration that it would keep prices in the Organization of the Petroleum Exporting Countries’ preferred range of $22 to $28 a barrel. Near-term oil futures in New York fell 32 cents to $37.42 a barrel.
The dollar fell against the euro and rose against the yen.
Nasdaq rose 24.69 points, or 1.2%, to 2,020.43. The tech sector was lifted in part by an upgrade of Advanced Micro Devices, but some investors also were looking for bargains after tech stocks suffered some of the sharpest declines over the last week.
The broad Standard & Poor’s 500 index was up 1.21 points, or 0.1%, at 1,135.82. The Dow Jones industrial average closed down 14.12, or 0.1%, at 10,437.85.
Shares of fast-food giant McDonald’s were the Dow’s biggest percentage loser after the death of Chairman and Chief Executive Jim Cantalupo, 60, apparently of a heart attack.
Worries about rates preoccupied investors for a fifth straight session.
While investors again shrugged off solid earnings, they also looked past the conference board’s index of leading economic indicators, which showed a 0.3% rise in March, in line with Wall Street expectations.
The market had hoped the report would show that the economy was growing fast enough to create jobs but was concerned that a better-than-expected reading might help prompt the Fed to raise interest rates this summer.
“The interest rate concerns are definitely taking a little bit of steam out of these earnings,” said Scott Wren, equity strategist for A.G. Edwards & Sons. “We’ll continue to get good earnings, and economic data shows that we’ve got some good economic activity going on here.
“But until we get the interest rate question settled,” he said, “we’re going to continue to see a lot of caution.”
Dow component 3M, which had already raised its quarterly outlook, managed to beat the heightened expectations by 3 cents a share and gave an improved outlook for the rest of the year, citing stronger healthcare and manufacturing revenue. 3M was up 3 cents at $83.76.
Advanced Micro Devices rose after Deutsche Bank upgraded the stock from “hold” to “buy,” spurring buying in other semiconductor shares. AMD rose 24 cents to $16.29, while rival Intel was up 23 cents at $26.68.
Other tech stocks also benefited from the upgrade. Microsoft rose 37 cents to $25.53 and Dell added 37 cents to $35.73.
“The market has been reacting appropriately to economic news lately, and the fact it hasn’t today is just attributable to low volume and a lack of participants,” said Brian Bruce, director of global investments at PanAgora Asset Management Inc. in Boston.
“This is just a temporary reaction. The market will eventually react to this news,” he said.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where consolidated volume came to 1.50 billion shares, compared with 1.82 billion Friday.
