Stocks Fall After Rate Hike
Stocks fell slightly Tuesday after the Federal Reserve raised interest rates as expected, exacerbating traders’ ill humor following a disappointing profit forecast from Dell.
Stocks may be falling in part because of sentiment on Wall Street that the increases are unwarranted. This increase and the one or two expected to follow may simply serve to give Ben S. Bernanke, who has been nominated as the next Fed chairman, wiggle room to cut rates as a stimulus next year, said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research.
The most recent sign of a slowing economy came from PC maker Dell, which trimmed its sales and profit targets for this quarter after the close of regular trading Monday, saying sales in the United States and Britain were weak. Dell slumped $2.64, or 8.3%, to $29.24.
The Dow Jones industrial average fell 33.30 points, or 0.32%, to 10,406.77.
Broader stock indicators also dropped. The Standard & Poor’s 500 index fell 4.25 points, or 0.35%, to 1,202.76, while the Nasdaq composite index was dragged down by Dell, slipping 6.25 points, or 0.29%, to 2,114.05.
Bond yields edged higher with the Fed’s decision to increase interest rates. The 10-year Treasury note rose to 4.56%, from 4.55% on Monday.
Crude oil rose 9 cents a barrel, to $59.85 in New York trading.
The nation’s manufacturing activity grew at a slower pace during October as companies increasingly felt the strain of a continuing rise in energy and raw materials prices, the Institute for Supply Management said. The ISM’s measure of costs, its price index, rose to 84.0 in October from a reading of 78.0.
More broadly, concerns about inflation, natural disasters, housing prices and energy prices continue to hang over the market, said Aaron Gurwitz, a senior strategist at Lehman Bros. private investment management group.
“The problem is that we see these concerns as not getting better; they’re sort of staying the same as they are or getting worse,” he said.
Bob Sitko, assistant vice president, USAA Private Investment Management, agreed. “Looking into next year, we have more worry than optimism. We’re positioning more cautiously than aggressively.”
In other market highlights:
*A measure of technology shares was the second-biggest contributor to the S&P; 500’s retreat among 10 industry groups. Intel, the world’s largest maker of computer chips, lost 85 cents to $22.65. Broadcom slipped 42 cents to $42, and National Semiconductor subtracted 56 cents to $22.07.
* Computer Sciences, the No. 5 U.S. computer-services company, surged $6.75, or 13%, to $58 for the best performance in the S&P; 500. Lockheed Martin and three private-equity companies are discussing a purchase price for Computer Sciences of as much as $65 a share, the Wall Street Journal reported, citing people familiar with the matter. Lockheed lost 61 cents to $59.95.
Spokesmen for Computer Sciences and Lockheed Martin declined to comment.
* Viacom and IAC/InterActiveCorp advanced after quarterly earnings exceeded estimates.
Viacom added 56 cents to $31.61. The company reported third-quarter profit, excluding some costs, of 47 cents a share, topping the 45-cent average estimate in a Thomson Financial survey of analysts.
IAC/InterActiveCorp, the television and Internet-services company led by Barry Diller, rallied 52 cents to $26.12. IAC said it had a profit of 32 cents a share excluding some costs in the third quarter. On that basis, the company was expected to earn 26 cents, according to Thomson Financial.
* Procter & Gamble, maker of Pampers and other consumer products, fell 74 cents to $55.25 despite reporting that its fiscal first-quarter net income grew a better-than-expected 4%.
