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The Honolulu Advertiser

Posted at 12:23 p.m., Monday, March 27, 2006

Stocks mixed ahead of Federal Reserve decision

By EILEEN ALT POWELL
Associated Press

NEW YORK — Investors put off major buying decisions today, leaving stocks mixed as Wall Street awaited the results of the first Federal Reserve rate-setting meeting chaired by Ben Bernanke.

"We've had a pretty good run here in anticipation that the Fed is nearly done raising interest rates," said Mark Vitner, senior economist with Wachovia Corp. in Charlotte, N.C. "But we have a real unknown quantity in Ben Bernanke ... so everyone is on Fed watch."

The Fed Open Market Committee under Bernanke is widely expected to follow the policy of former Chairman Alan Greenspan and announce a rate increase at the end of its two-day meeting on Tuesday. That would boost short-term rates one-quarter point to 4.75 percent.

Ahead of the announcement, the markets turned in a lackluster performance Monday.

According to preliminary calculations, the Dow Jones industrial average slid 29.86, or 0.3 percent, to 11,250.11.

Broader stock indicators were mixed. The Standard & Poor's 500 index, which seesawed through the day, ended down 1.34, or 0.1 percent, at 1,301.61. The Nasdaq composite index advanced 2.76, or 0.1 percent, to 2,315.58.

A similar stall pattern was apparent last week as the major indexes finished narrowly mixed. For the week, the Dow Jones industrials were flat, while the Standard & Poor's 500 fell 0.33 percent and the Nasdaq composite index gained 0.27 percent.

While the market widely expects the Fed to announce its 15th consecutive rate increase on Tuesday, investors are more focused clues to whether the Fed believes it has raised interest rates sufficiently to contain inflation or will push them still higher.

Mark Donahoe, managing director and head of equity trading at Piper Jaffray in Minneapolis, said a lot of people were "sitting on the fence waiting for the Fed."

He added: "The question is, are they going to take the foot off the pedal in terms of tightening or do they see some inflation pressures going forward," he said.

Kim Caughey, equity research analyst, Fort Pitt Capital Group in Pittsburgh, agreed, saying that "everything seems to be steady as she goes" until the Fed speaks.

Traders also kept a close watch on crude oil prices, which slipped under $64 a barrel Monday after the release of three foreign hostages by Nigerian militants eased concerns about supplies from the oil-rich African nation. But the volatile Nigerian situation — and nagging worries about supplies from Iran — were expected to limit the price decline.

On Monday, gasoline futures rose 0.56 cent to close at $1.8288 per gallon on the New York Mercantile Exchange, while light sweet crude futures fell 10 cents to settle at $64.16 per barrel.

Meanwhile, silver hit its highest price in nearly two decades, with the May silver contract hitting $10.94 an ounce Monday on the New York Merc. It settled at $10.895 an ounce, up 16 cents. The momentum silver buying, apparently in anticipation of a silver exchange-traded fund, helped boost gold; the April gold contract settled at $567.40 and ounce, up $6.90.

The Nasdaq got a boost from Santa Clara, Calif.-based Intel Corp. after two analysts speculated that a pair of soon-to-be-released processors could give the chip maker an edge over rivals and First Albany analyst Auguste Richard upgraded his rating to "neutral" from "underperform." Intel share rose 15 cents, or 0.8 percent, to $19.75.

Brokerage firms advanced strongly, led by Goldman Sachs Group Inc. which ended the day up $2.83, or nearly 2 percent, at $155.

Walgreen Co. rose 65 cents, or 1.5 percent, to $45.02 after the nation's biggest pharmacy chain by revenue reported second-quarter earnings of $523.5 million, or 51 cents a share. It reported strong sales, but results were a penny short of the 52 cents expected by analysts surveyed by Thomson Financial.

Lucent Technologies Inc. rose 2 cents, or 0.7 percent, to $3.08 as investors weighed last week's announcement that the Murray Hill, N.J., company was pursuing a "merger of equals" with France's Alcatel SA. It comes on the heels of several mega-mergers is the telecommunications industry.

The Russell 2000 index of smaller companies inched up 0.20, or about flat, to 754.03.

Declining shares outpaced advancing shares by about 3-to-2 on the New York Stock Exchange, where volume came to 1.38 billion shares, down from 1.49 billion at the same time Friday.

Overseas, Japan's Nikkei stock average closed 0.5 percent higher. Britain's FTSE 100, Germany's DAX index and France's CAC-40 all closed down slightly more than 1 percent.