Posted at 12:30 p.m., Monday, May 14, 2001
Wall Street quiet anticipating possible Fed rate cut
Associated Press
NEW YORK — Anxiety over interest rates made for a quiet day on Wall Street today, with investors reluctant to make any big moves on the eve of an important Federal Reserve meeting. Blue chips rose moderately, while technology stocks drifted lower, giving the Nasdaq composite its fourth-straight decline.
Analysts said the market's tentativeness resulted from doubts about how big a rate cut the Fed will make — if it makes one at all — tomorrow.
"It's really been a non-event day," said Stephen Carl, head of equity trading at The William Capital Group. "Everybody's just on the sidelines waiting to see what the Fed does. The volume is so low that it's hard to tell what, if anything, else is going on."
The Dow Jones industrial average closed up 56.02 at 10,877.33, according to preliminary calculations, on gains that mostly came late in the session.
Broader indexes were mixed. The Nasdaq slipped 25.51 to 2,081.92, giving it a 116.85-point loss over the past four sessions. But the Standard & Poor's 500 index rose 3.25 to 1,248.92.
Although most analysts still expect the Fed to make its fifth interest rate cut of 2001 at its meeting tomorrow, there are doubts about whether the reduction will be as big as expected.
The central bank has been lowering rates to stimulate the sluggish economy, but some recent data have indicated business may not be as weak as previously thought. If the economy shows signs of strength — as some better-than-expected retail and consumer sentiment reports suggested last week — many fear the Fed will be less inclined to cut aggressively.
The problem for the market: In the absence of strong earnings, investors have become increasingly dependent on the Fed's cuts for catalysts to rally stocks. Stocks spent most of last week in a narrow trading range in anticipation of the Fed's next move.
"Not having the 100 percent certainty that the Fed will lower interest rates as much as many want is what's causing this," said Steven Goldman, market strategist at Weeden & Co. "But overall, the market remains on good footing."
The latest Fed report released today showed further evidence that the economy slowed during the spring. Industrial production fell in April by a bigger-than-expected 0.3 percent, the seventh-straight monthly decline, according to the report.
Technology stocks were especially weak, reflecting the gradual selling since April's big advance. Cisco Systems fell 48 cents to $18.57, while Intel dropped 53 cents to $27.41.
Non-technology issues fared better, including banker J.P. Morgan, up $1.20 at $47.64.
Also today, SunTrust Banks fell $4.81 to $60 on news it made a $14.7 billion bid for Wachovia, a move that could derail First Union's planned $12.5 billion purchase of the North Carolina bank. Wachovia rose $3.85 to $64.75, while First Union was up 56 cents at $30.58.
Trading activity was muted throughout the session, with preliminary figures suggesting volume would rival Friday, when both the Nasdaq Stock Market and New York Stock Exchange recorded their slowest days of 2001.
Advancing issues led decliners 8 to 7 on the NYSE. Volume was 848.89 million shares, compared with 894.07 million Friday.
The Russell 2000 index slipped 0.72 to 486.64.
Overseas, Japan's Nikkei stock average slid 1.2 percent. Germany's DAX index fell 1.2 percent, Britain's FT-SE 100 lost 3.5 percent, and France's CAC-40 fell 1.4 percent.
