Stocks mixed amid worries
The stock market finished mixed after a volatile session Monday in which investors grappled with the possibility that the Federal Reserve might not lower interest rates as much as they hope.
Speeches from Fed officials Monday -- slightly more than a week before the central bank’s next interest rate meeting, on Sept. 18 -- seemed to give investors more reason to be optimistic about the economy, but the officials avoided hinting at the timing or size of any rate reduction.
San Francisco Fed President Janet Yellen said that although market turmoil had the potential to hurt the economy, rate policy should not be used to shield investors from losses. Dallas Fed President Richard Fisher said the economy appeared to be “weathering the storm,” and Atlanta Fed President Dennis Lockhart said investors should consider Friday’s dismal unemployment report in the context of a mostly strong batch of retail sales reports.
The payroll data showed the first monthly decline in jobs in four years, rekindling fears about housing and credit market weakness bleeding into the overall economy and squeezing consumer spending.
For many investors, a rate cut to loosen up the tight credit markets, after more than a year of the Fed’s standing pat on rates, is practically a given. The debate, as they see it, is whether the Fed next week will cut its benchmark rate by a quarter of a point or half a point -- and whether policymakers will continue to reduce the rate as the year goes on.
There could be a major sell-off in stocks if the Fed doesn’t ease next week, said Scott Fullman, director of investment strategy for I.A. Englander & Co. Until then, trading is likely to be choppy, he said.
“People are on the sidelines,” Fullman said. “I think people want to be convinced of what’s happening before they get back in.”
The Dow Jones industrial average rose 14.47 points, or 0.1%, to 13,127.85, after falling 250 points Friday.
Broader stock indexes fell. The Standard & Poor’s 500 index slipped 1.85 points, or 0.1%, to 1,451.70, and the Nasdaq composite index declined 6.59 points, or 0.3%, to 2,559.11.
The Russell 2,000 index of smaller companies fell 5.98 points, or 0.8%, to 769.81.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where consolidated volume came to 2.85 billion shares, down from 3.19 billion on Friday.
Treasury bond yields fell as stocks slipped. The yield on the benchmark 10-year Treasury note dropped to 4.32% from 4.38% late Friday.
The dollar slipped against most other major currencies, while gold, which has risen sharply in recent weeks amid concerns about the dollar’s strength, extended its gains. A rate cut by the Fed could hurt dollar-denominated assets, prompting some investors to shift into gold.
Fresh economic data were sparse Monday. The one notable report came from the Federal Reserve, which said consumer credit rose at an annual rate of 3.7% in July, down from a 5.9% growth rate in June.
The market also absorbed more news of fallout from the housing downturn. Countrywide Financial said late Friday that it would cut as many as 12,000 jobs -- or 20% of its workforce -- as the mortgage lender tried to ride out the upheaval. The company’s shares fell $1, or 5.5%, to $17.21 on Monday.
Washington Mutual fell 28 cents to $34.74 after the bank again increased its provision for loan losses. “It now appears that housing and capital market corrections will be worse and longer lasting than even we expected,” Chief Executive Kerry Killinger said.
A gauge of home builders declined 2.8% to its lowest level since May 2003. Lennar, the largest U.S. home builder, fell 64 cents, or 2.4%, to $25.88.
In other market highlights:
CB Richard Ellis Group dropped $1.42, or 5.6%, to $24.08. The commercial real estate service company was downgraded by analysts at Goldman Sachs, who cited overall industry conditions.
Bear Stearns rose $2.13, or 2%, to $107.50. British billionaire Joseph Lewis, who controls more than 170 companies, bought a 7% stake in the investment bank. The shares are down 34% this year.
Some technology stocks also were strong. Advanced Micro Devices rose 33 cents, or 2.6%, to $12.94 after releasing its newest microprocessor, and Apple rose $4.94, or 3.8%, to $136.71 after selling its millionth iPhone on Sunday. Intel initially rose after boosting its third-quarter sales outlook but finished down 12 cents at $25.35.
Take-Two Interactive Software climbed 51 cents, or 3.2%, to $16.26 in extended trading after the maker of the “Grand Theft Auto” video game posted higher sales and a narrower loss than analysts estimated. In addition, Legg Mason Capital Management said it raised its stake in the company.
Overseas, key stock indexes slumped 2.2% in Japan, 0.9% in Britain, 0.8% in Germany and 0.8% in France.
