Posted at 11:43 a.m., Tuesday, December 11, 2001
Market falls back despite Fed rate cut
• Hawai'i Stocks
• Updated Market Chart
• Fed cuts interest rate for 11th time this year
Associated Press
NEW YORK — The stock market struggled to find a direction today despite the Federal Reserve's 11th interest rate cut of the year and a bullish forecast from Nokia.
Tech stocks managed a small gain, but the broader market fell back after a disappointing outlook from Merck late in the session. Analysts said the Fed's action, while welcome, was widely expected and not enough to inspire sustained buying. They said Merck's warning remind investors that companies, and in turn, the market, must still contend with uncertainty about the economy.
The Dow Jones industrial average closed down 33.08 or 0.3 percent, at 9,888.37, according to preliminary calculations. It was the fourth straight drop for the index, which had risen as much as 93 points on news of the Fed cut.
Broader stock indicators were mixed. The Standard & Poor's 500 index lost 3.17, or 0.3 percent, to 1,136.76. The technology-focused Nasdaq composite index rose 9.81, or 0.5 percent, to 2,001.93.
The market's good feeling and solid gains right after the rate cut dissipated with Merck's forecast of no growth in earnings per share next year, mainly due to expiration of the patent on its key ulcer drug, Prilosec. The stock fell $2.01 to $64.98.
"Merck gave everyone an excuse to pull their bids," said Todd Clark, co-head of trading at WR Hambrecht. "You're also getting a little bit of 'sell on the news' reaction to the Fed rate cut after initial euphoria. This wasn't a surprise, so there was nothing to react to."
The central bank did indicate it saw some signs of "preliminary and tentative" stabilization, but said it remained focus on the risk of more economic problems.
"I think the market was reassured by the fact the Fed indicated they might continue to cut ... and at the same time hinted that stabilization might be at hand," said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum.
Tech stocks fared a little better because of an upbeat forecast from Nokia. The world's biggest cell phone maker rose $1.71 to $25.50 after saying it expects sales to rise 20 percent during the fourth quarter. It is the latest technology company to forecast stabilizing or improving business. Last week, Cisco and Oracle made similar announcements.
Other tech stocks showed strength, including IBM, which gained $1.84 to $121.50.
Manufacturing and industrial stocks were mixed. General Motors fell $1.69 to $48.65, while Caterpillar rose 49 cents to $50.50.
Analysts say the losses are nothing to worry about, given the extent of the recent rally. The Dow is up more than 20 percent from the 2001 low it set Sept. 21; the Nasdaq has gained about 40 percent.
Still, there have been worries that the gains are premature, and that there might not be enough good earnings or economic news to sustain the upward trend in the short term.
Advancing issues and declining issues traded nearly evenly on the New York Stock Exchange. Volume came to 1.36 billion shares, compared with 1.18 billion at the same point Monday.
The Russell 2000 index gained 0.58 to 474.76.
Overseas, Japan's Nikkei stock average slipped 0.9 percent. In Europe, Germany's DAX index gained 0.4 percent, Britain's FT-SE 100 fell 0.5 percent, and France's CAC-40 lost 0.1 percent.
