Wall Street in a Holding Pattern
Stocks closed mostly lower Monday as Wall Street awaited a key decision on interest rates and the transfer of power in Iraq.
Until the final hour of trading, the markets saw low volatility, light volume and little conviction in advance of next week’s Federal Reserve meeting, during which the Fed’s Open Market Committee is expected to decide on an interest rate hike.
Investors were also looking to the June 30 handover of power in Iraq, hoping tensions would start to ease there.
Offsetting those concerns is confidence that second-quarter corporate earnings reports, due in July, will show continued strength, analysts say.
“On the one hand, we have some positive earnings to look forward to, but on the other, we have these interest rate questions and the geopolitical risks,” said Keith Keenan, trader at Wall Street Access. “But all that means this week is that we’re in a holding pattern. There’s just no motivation on the part of buyers or sellers.”
The Dow Jones industrial average fell 44.94 points, or 0.4%, to 10,371.47. The Dow had traded in a narrow range until selling picked up at the end of the day.
Declining issues barely outnumbered those advancing on the New York Stock Exchange.
Broader stock indicators were moderately lower. The Standard & Poor’s 500 index was down 4.72 points, or 0.4%, at 1,130.30, and the Nasdaq composite index lost 12.35 points, or 0.6%, to 1,974.38.
U.S. Treasury bond yields slipped. Some investors said current yields -- near their highest level in two years -- already reflect expectations for the Fed to lift its key short-term interest rate a quarter of a percentage point next week, from the current 46-year low of 1%.
The benchmark 10-year T-note yield fell to 4.69% from 4.71% on Friday. Demand for Treasuries increased before the government’s sale of $25 billion in new two-year notes Wednesday.
Oil prices fell as the resumption of some Iraqi exports overshadowed the political tensions in the Middle East after Iran seized three British naval vessels. Oil slid $1.12 to $37.63 a barrel in New York, after trading as high as $39.05 near the opening.
On Wall Street, an index of telecommunications services companies had the biggest decline among the 10 industry groups in the S&P; 500, falling 0.9% in the session.
Verizon shed 44 cents to $35.73 as Cablevision Systems, Verizon’s main competitor among local-phone carriers, began offering a $90-a-month package of TV, telephone and Web access service. Cablevision fell 78 cents to $21.22. SBC Communications lost 20 cents to $24.40.
Barron’s magazine predicted that telephone, cable and satellite prices would decline as the companies compete more with one another and fail to meet their growth goals.
In other market highlights:
* Wachovia’s $14.3-billion purchase of SouthTrust lifted the S&P; 500 regional banks index 0.9%. SouthTrust soared $4.57 to $39.37. The addition of SouthTrust gives Wachovia, the No. 4 U.S. bank, $52.7 billion in assets and 712 consumer banking offices. Wachovia declined $1.98 to $45.02.
* Wal-Mart Stores lost 69 cents to $54.93. The retailer said June sales might increase less than 4%, below its expectations.
* Real estate investment trust shares rallied after Simon Property Group, the world’s largest owner of shopping malls, agreed to buy outlet-mall owner Chelsea Property Group for cash and stock worth $66 a share, or $3.5 billion in total. Simon Property shares fell 32 cents to $51.98. Chelsea Property jumped $7.01 to $65.25.
Among other REITs, Essex Property gained $1.05 to $68.80, SL Green rose $1.04 to $46.07 and Tanger Factory Outlets was up 83 cents to $39.60.
* Motorola added 20 cents to $17.54 after saying that a planned initial stock offering of its Freescale Semiconductor unit might raise as much as $2.4 billion. Motorola said it would keep about $1.5 billion of the money raised.
