Stocks retreat on economic worries
Stock prices pulled back Tuesday as investors, uneasy about a drop in consumer confidence, traded cautiously before an impending decision on interest rates by the Federal Reserve.
After the Fed’s half-point reduction in September, most investors expect the central bank to deliver a quarter-point cut at the conclusion today of its two-day meeting.
But inflation remains a threat. Oil prices fell Tuesday, but only after hitting a record a day earlier, and the dollar has been tumbling. So a rate cut today -- not to mention additional decreases that the market may be counting on -- is not a given.
Given the troubles in the housing and credit markets, some on Wall Street fear economic growth could come to a halt if rates aren’t lowered. The statement the Fed issues today with its rate decision will be closely read for clues about future moves.
“Should the Fed choose not to cut anymore and the economy continue to slip, that potentially could raise some concerns,” said Phil Orlando, chief equity market strategist at Federated Investors.
For the most part, earnings have been coming in better than expected over the last few weeks, particularly in the technology sector. But consumers, the key drivers of the economy, appear to be flagging. The Conference Board’s index of consumer confidence fell this month to its lowest level in two years.
The Dow Jones industrial average fell 77.79 points, or 0.6%, to 13,792.47, and the S&P; 500 index fell 9.96 points, or 0.6%, to 1,531.02. The tech-dominated Nasdaq composite index edged down 0.73 of a point to 2,816.71.
The Russell 2,000 index of smaller-company stocks fell 5.57 points, or 0.7%, to 816.15.
The Nasdaq was helped by continuing strength in such bellwethers as Apple, Microsoft and Google. Apple rose $1.91, or 1%, to $187; Microsoft climbed $1, or 2.9%, to $35.57; and Google advanced $15.54, or 2.3%, to $694.77.
Oil futures retreated $3.15 to $90.38 a barrel in New York, after hitting a record Monday above $93 a barrel. Gold prices also fell, pulling November gold futures down $5.10 to $784.30 an ounce.
The dollar was mixed against other major currencies.
Treasury yields moved little. The 10-year Treasury note finished at 4.38%, unchanged from late Monday.
Disappointing reports from Procter & Gamble and Qwest Communications International and a management shake-up at Merrill Lynch gave little reason to buy before the Fed’s decision.
Merrill Lynch’s chairman and chief executive, Stan O’Neal, stepped down Tuesday as expected after the brokerage last week posted the biggest quarterly loss in its 93-year history. But no replacement was named aside from an interim nonexecutive chairman. Merrill Lynch shares fell $1.86, or 2.8%, to $65.56.
Procter & Gamble was the biggest loser among the 30 Dow components after warning that higher commodity costs would squeeze profit margins. P&G; fell $2.88, or 4%, to $68.95.
Although Qwest reported a third-quarter profit jump, its shares tumbled $1.12, or 14%, to $7.06 after the telecommunications company declined to give details about its outlook.
In other market highlights:
* Shares of raw-material producers in the S&P; 500 lost 2.2% as a group after metal prices retreated. Freeport-McMoRan Copper & Gold, the world’s second-largest producer of copper, slipped $3.85 to $114.01. Newmont Mining, the world’s second-biggest gold miner, fell $1.23 to $46.44.
DryShips, which owns and operates ships that carry commodities, plummeted $22.97, or 18%, to $108. Chinese steel producers are reportedly taking a hard line in negotiations on what they’ll pay in 2008 for Australian iron ore, which could slow shipments of the ore.
* United States Steel slid $7.88, or 7%, to $104.62 after reporting lower third-quarter profit, citing lower prices and shipments and higher raw material and acquisition costs.
Other steel stocks also sank. Nucor slumped $2.43, or 3.8%, to $61.12; ArcelorMittal fell $4.52, or 5.4%, to $79.36; L.A.-based Reliance Steel lost $1.22, or 2.1%, to $57.82; and AK Steel Holding dropped $2.68, or 5.1%, to $49.82.
* R.R. Donnelley & Sons added $2.39, or 6.4%, to $39.90. The printer posted a 6.3% rise in third-quarter profit and raised its full-year forecast.
* Pitney Bowes slumped $7.06 to $39.93. The mail equipment maker’s third-quarter profit and sales fell short of expectations, and the company said fourth-quarter profit would disappoint as well.
* Avon Products climbed $1.70 to $40.77. Third-quarter profit for the direct seller of beauty products jumped 61%.
* Overseas, key stock indexes fell 0.3% in Japan, 0.7% in Britain, 0.4% in Germany and 0.6% in France. Hong Kong’s Hang Seng index rose 0.2%.
