Stocks barely budged Tuesday, as concern about what the Federal Reserve would decide today on interest rates overshadowed a drop in oil prices to a seven-week low.
Attempts at a rally were thwarted by anticipation that Fed policymakers would raise their benchmark interest rate for the fourth time this year and signal another increase in December.
“The market will clearly take its cue” from the Fed, said Eric Wiegand, director of Credit Suisse First Boston’s private client group. “With a moderation in energy prices, the market will feel some relief.”
The market has already factored in today’s expected action by the Fed to raise its benchmark interest rate a quarter-point, to 2%, said Robert Christian, chief investment officer at Wilmington Trust Co. But he said traders were anxious about what the Fed might say about the economy, including the inflationary effect of the dollar’s recent decline. A weaker dollar makes imports more expensive.
“The issue is going to be the rhetoric they use around the rate increase,” Christian said. Some investors, he said, are worried that the dollar’s fall might prompt the Fed to move more aggressively than it would otherwise. Higher rates would make U.S. investments more attractive, helping boost demand for the dollar versus other currencies.
The Dow Jones industrial average was down 4.94 points, or 0.05%, at 10,386.37.
Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index slipped 0.81 of a point, or 0.07%, to 1,164.08, while the Nasdaq composite index was up 4.08 points, or 0.2%, at 2,043.33.
Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange, while Nasdaq advancers led by a slim margin.
Tuesday’s performance marked the second session when markets have paused following last week’s postelection rally. However, dealers said it was encouraging there had been no sell-off.
The market’s unease was also tempered by a strong drop in crude oil futures, which continued their abrupt downward trend of recent weeks. A barrel of light crude settled at $47.37, down $1.72, in New York trading.
In other market highlights:
* Merck was the Dow’s biggest decliner, falling 57 cents to $26. The company disclosed after the market closed Monday that the Securities and Exchange Commission and the Justice Department were examining the company’s handling of Vioxx. Merck recently pulled the leading arthritis drug off the market after studies showed it increased the risk of heart attacks.
* Chip stocks fell after Infineon Technologies, Europe’s second-largest semiconductor maker, predicted an industry slowdown because of higher inventory and declining prices. Intel shed 15 cents to $23.08, and Altera lost 33 cents to $22.31.
* Maytag rose $1.74, or 9.4%, to $20.27 after the appliance maker forecast 2005 profit that exceeded analysts’ projections.
* Shares of Los Angeles-based Jamdat Mobile fell $8.41, or 26%, to $23.94 after the mobile phone games publisher disappointed investors with its first quarterly report since its initial public offering. Jamdat reported third-quarter net income of $8,000 on revenue of $9.5 million.
* Residential real estate brokerage ZipRealty raised more than $59 million in an initial public offering of stock. The Emeryville, Calif., company priced 4.55 million shares at $13 a share, exceeding the target price of $10 to $12 a share. Trading is expected to begin on Nasdaq today under the symbol ZIPR.
* Energy stocks slipped on falling oil prices. Exxon Mobil declined 86 cents, to $49.31, and ChevronTexaco lost 59 cents, to $52.77. But industrial companies advanced on lower crude, with Caterpillar rising $1.30 to $88.31.
* Shares of Cheesecake Factory rose 66 cents, to $46.76, after the Calabasas Hills-based company announced a 3-for-2 stock split, effective at the close of business on Dec. 8. The stock split will be in the form of a 50% stock dividend and will be distributed to stockholders of record as of Nov. 23.
* U.S. Treasury debt was little changed Tuesday as nervousness ahead of the Fed meeting prevented traders from making any major bets. The yield on the benchmark 10-year note rose to 4.23%, from 4.22% on Monday.
Bond bulls hoped the Fed would pause after a rate increase this week, but October’s U.S. jobs strength, reported last week, suggested the Fed would raise rates another quarter-point at its December meeting.