Stocks Stall on a Slow Day
Stocks finished a quiet session little changed Monday as investors’ anticipation of the Federal Reserve’s decision on interest rates muted their reaction to lower oil prices and three acquisitions.
With no new reports to offer clues about the economy, investors traded cautiously ahead of the Fed’s latest move on interest rates when policymakers meet Wednesday. On Friday, signs of moderating job growth fueled hopes that a cooling economy would prompt the central bank to consider pausing its rate tightening.
“I think you’ll see a lot of waffling” before the Fed meeting, said Rick Pendergraft, an equity trader at Schaeffer’s Investment Research. “Everyone is pretty much expecting a quarter-percentage-point lift this time, but it’s up in the air for the June meeting.”
Meanwhile, the market showed some excitement over Wachovia’s $24.2-billion planned takeover of Golden West Financial and Thermo Electron’s $10.6-billion offer for Fisher Scientific International. Berkshire Hathaway also made its first acquisition of an overseas company.
The Dow Jones industrial average rose 6.80 points, or 0.06%, to 11,584.54, its highest close in more than six years. The Dow is 138 points from its all-time high of 11,722.98, reached Jan. 14, 2000.
Broader stock indicators stood near their highs from February 2001. The Standard & Poor’s 500 index fell 1.10 points, or 0.08%, to 1,324.66, and the Nasdaq composite index gained 2.42 points, or 0.1%, to 2,344.99.
Long-term bonds were also little changed in advance of the Fed meeting. The yield on the 10-year U.S. Treasury note was 5.11%, up from 5.10% on Friday.
Analysts say Wall Street’s nervousness about the Fed’s next move on interest rates was restraining stocks even though the Dow was within reach of its all-time high. Most analysts believe that the central bank will raise its key lending rate to 5% on Wednesday, and investors will be picking apart the Fed’s policy statement for signs of whether more hikes are coming.
Still, investors have been impressed by the economy’s strength despite surging energy costs and the Fed’s mission to stifle inflation by gradually raising short-term interest rates. Enthusiasm over solid corporate earnings growth -- companies in the S&P; 500 index have averaged double-digit gains for 15 consecutive quarters -- has carried stocks sharply higher this year.
But the question remains: If the Dow breaks through its high, can the market keep pressing upward?
“If we remove everything else and base it on the fundamentals, absolutely,” said Art Hogan, chief market analyst for Jefferies & Co. “But there are other forces out there we have to contend with, and they won’t go away just because we’ve set a new record.”
Oil prices fell below $70 a barrel after Iranian President Mahmoud Ahmadinejad wrote in a letter to President Bush that Iran was seeking ways to ease tension with the U.S. over Iran’s nuclear program. Crude oil futures declined 42 cents to $69.77.
In other market highlights:
* Shares of Intel rallied 60 cents, or 3.1%, to $20.11 for the best performance in the Dow. Intel separated the production of memory chips from other processors, which may be a precursor to a spinoff or sale of the unit that makes semiconductors to store programs on cellphones and DVD players.
* Golden West Financial jumped $4.39 to $74.90. Wachovia is buying Golden West to accelerate expansion into the fast-growing market in California. Wachovia dropped $3.97, or 6.7%, to $55.42 for the worst performance in the S&P; 500.
Countrywide Financial rose 42 cents to $41.80. Washington Mutual gained 83 cents to $46.33.
* Fisher Scientific, a provider of laboratory supplies and services, rose $2.22 to $75.95. Thermo Electron agreed to buy Fisher, which is twice its size, to become the largest supplier of medical laboratory equipment. Fisher investors would get two Thermo shares, or $78.90, for each of their shares. Thermo lost 91 cents to $38.54.
* Berkshire rose $490 to $89,200 in the wake of its announcement Friday that it was buying an 80% stake in Israel-based Iscar Metalworking for $5 billion.
* Oil industry stocks slipped as crude prices declined. EOG Resources, an oil and natural-gas producer, dropped $1.76 to $74.55. Valero Energy fell 76 cents to $64.24. Exxon Mobil dropped 29 cents to $63.71.
* Walt Disney and computer networking giant Cisco Systems report earnings after the market closes today. Disney fell 32 cents to $28.77, and Cisco added 1 cent to $21.76.
* Aluminum producer Alcoa added $1.02 to $36.12 after an Australian newspaper reported that it might attract takeover offers from mining companies.
