Stocks end mixed as Fed meets
Wall Street wobbled through a listless session and closed mixed Tuesday as investors awaited today’s announcement by the Federal Reserve on interest rates. Modest gains in the Dow Jones industrial average were enough for the index to set new trading and closing records.
The Fed’s Open Market Committee began a two-day meeting Tuesday, and although many investors expected the central bank’s policymakers to leave interest rates unchanged for the third straight meeting, there was still concern on the Street about the assessment of the economy to be issued today.
Wall Street’s performance was in contrast to a big rally Monday, when the Dow surged 114 points to a record high close and other indexes posted big gains.
Steve Sachs, director of trading at Rydex Investments, says that the run-up this month in the Dow and blue-chip stocks in general has occurred too quickly to avoid a pullback. “There’s probably good reason for the rally to at least pause here.”
The Dow rose 10.97 points, or 0.1%, to 12,127.88, eclipsing the record close of 12,116.91 set Monday. The Dow also set a new trading high of 12,133.80, edging past a day-old record of 12,125.16 before giving back some of its gains.
Broader stock indicators ended the day mixed after spending much of the session lower. The Standard & Poor’s 500 index was up 0.36 of a point, or 0.03%, at 1,377.38, and the Nasdaq composite index was down 10.72 points, or 0.5%, at 2,344.84.
Bonds were little changed as investors awaited the Fed’s decision. The yield on the benchmark 10-year Treasury note fell to 4.82%, from 4.83% on Monday.
Crude oil futures rose 54 cents to $59.35 a barrel in New York trading.
Sachs said he expected investors would stop and catch their breath as earnings season wound down and Wall Street received economic news from the Fed and an advance reading of the third-quarter’s gross domestic product. The Commerce Department report on the broadest measure of the economy is due Friday. Sachs also said that the rise in the major indexes had at times occurred with too few stocks driving the advances.
“I would’ve liked to have seen the move be a little more broad. We’re definitely a little overbought here,” he said.
A report from the Richmond Fed might have stirred some concern among investors about how quickly the economy might be slowing. The Richmond Fed found that manufacturing activity in the central Atlantic region has been flat to slightly lower this month.
Edmund Hyland, global investment strategist at JPMorgan Private Bank, believes that although Wall Street largely expects the Fed will leave short-term interest rates untouched, investors are holding their breath until after the Fed meeting.
“It’s just sideways movement in anticipation of the Fed,” Hyland said.
The Fed left interest rates unchanged starting in August, interrupting a two-year string of 17 straight increases. In sending stocks higher in recent months, investors have bet that the Fed will see the economy as having slowed adequately to keep inflation in check and forestall an interest rate increase.
In other market highlights:
* GM rose $1 to $36.19 for the steepest advance in the Dow. The automaker reports third-quarter earnings today. Analysts David Healy of Burnham Securities and Jon Rogers of Citigroup predicted profit might top the average estimate of 49 cents in a Thomson survey.
Smaller rival Ford Motor increased 40 cents to $8.30, a day after reporting a $5.8-billion third-quarter loss. Goldman Sachs raised its recommendation on the shares to “neutral” from “sell,” citing the prospects for a restructuring under new Chief Executive Alan Mulally.
* Amgen jumped $1.57 to $74.94. After the close of regular trading Monday, the Thousand Oaks-based biotechnology company boosted its 2006 forecast for a second time this year as third-quarter earnings beat analysts’ estimates.
* Shares of billionaire Warren E. Buffett’s investment company, Berkshire Hathaway, rose $600 to $100,600. The stock closed at $100,000 for the first time Monday, setting a new record for the most expensive U.S. stock.
* Nucor increased $6.47 to $61.58 after posting a record third-quarter profit on higher demand and prices for its steel products.
* Coach, the largest U.S. luxury leather-goods maker, gained $2.88 to $39.21 after raising its earnings forecast for the year to at least $1.63 a share, up from a previous estimate of at least $1.55.
* Lockheed Martin, the world’s largest defense contractor, advanced 92 cents to $89.11 after reporting a 47% jump in its third-quarter profit and raising its 2006 financial forecast.
* DuPont, one of the strongest performers of the 30 stocks that make up the Dow, rose 55 cents to $46 after posting a higher third-quarter profit and an increase in sales.
* Lucent Technologies reported essentially flat fiscal fourth-quarter earnings amid a 5% increase in revenue. Lucent, which is being acquired by France’s Alcatel, topped Wall Street’s forecasts and rose 15 cents, or 6.4%, to $2.49.
* Texas Instruments fell $1.36, or 4.3%, to $30.52 after the chip maker warned that lower orders would hurt sales in the current quarter.
