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Rate concerns on Wall St.
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May 17, 1999: 3:18 p.m. ET
Stocks move off their lows but remain jittery ahead of FOMC meeting
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NEW YORK (CNNfn) - U.S. stocks trimmed their losses in late trading Monday, but the market remained on edge ahead of Tuesday's policy setting meeting at the Federal Reserve.
Shortly before 3 p.m. the Dow Jones industrial average was off 93.93 points at 10,819.39, recovering from a loss of more than 150 points earlier in the day. Market breadth on the New York Stock Exchange remained sharply negative, with losers leading gainers 2,102 to 882 on light trading volume of 501 million shares.
The Nasdaq Composite inched up 5.51 points to 2,533.37 and the S&P 500 index shed 4.63 to 1,333.17. (Click here for a look at today's list of CNNfn's market movers.)
Rate jitters also took a toll on the bond market, leaving bonds trading mixed after their tumble Friday. The bellwether 30-year Treasury bond rose 3/32 of a point in price, for a yield of 5.91 percent.
The dollar gained ground against the Japanese yen but remained barely changed against the euro.
Wall Street on Fed watch
Stock market investors continued to sell a broad array of shares, opting to lighten their holdings ahead of Tuesday's meeting of the Federal Open Market Committee, the forum in which the Federal Reserve decides the direction of short-term interest rates.
Although the Fed is not expected to raise rates at this time, Friday's surprisingly strong inflation report prompted some Wall Street watchers to predict the central bank might adopt a tightening bias, a move that would indicate the Fed is much more likely to raise rates at its next meeting.
Meanwhile, banking stocks, one of Wall Street's most interest rate-sensitive sectors and among the biggest stock losers in Friday's market sell-off, continued their retreat.
Among the financial Dow components, J.P. Morgan (JPM), whose stock shot up sharply last week on takeover speculation, lost 3-1/4 to 137-11/16 and Citigroup (C) slipped 1-1/2 to 69-1/2.
Techs perk up
The threat of higher interest rates around the corner also kept investors early in the day from deepening their holdings in the technology sector. Many tech companies are not only richly valued but growth-oriented, relying heavily on credit to expand. A rate hike would serve to weaken growth prospects by making this capital borrowing more expensive and the risk of default more likely.
But as the end of the trading session approached, some bargain hunters dipped their toes into the high-tech waters, helping select members of the sector and the broader market to recover partially from the morning's slump.
Shares of technology leaders were mixed, as Dow member IBM (IBM) fell 2-7/8 to 236-3/5 but fellow computing blue chip Hewlett Packard (HWP) crawled up 3/8 to 84-9/16 ahead of its second-quarter earnings report, due after the bell. Cisco (CSCO) slipped 5/8 to 114-13/16, but Microsoft (MSFT) rose 1-7/8 to 78-3/4 and Intel (INTC) edged up 7/8 to 58-7/8.
In the highly valued Internet sector, news of a high-profile alliance between RealNetworks (RNWK) and Web portal Snap.com, a joint venture of CNet (CNET) and GE (GE) unit NBC, did little to boost investors' spirits.
RealNetworks shares fell 3-1/4 to 85-7/16 even though the technology-sharing arrangement will result in higher revenue for the digital streaming company, representing "one of the largest financial transactions" it has ever entered in the field. Dow component GE slipped 5/16 to 105-5/8, leaving CNet as the deal's major stock beneficiary, with shares climbing 2-7/8 to 119-1/8.
Mergers give scant lift
Elsewhere in the market, investors focused much of their attention on corporate acquisitions activity, especially a $37 billion telecommunications merger between Global Crossing (GBLX) and US West (USW).
Despite the high value of the deal, investors greeted the news with skepticism, sending shares of Global Crossing down 1-1/4 to 60-1/8 and US West off 5-3/8 to 56-7/8.
Most other telecom stocks sank as well, but BellSouth (BLS), the only original Baby Bell telephony company without a global merger partner, defied the trend. Shares climbed 1-7/8 to 47-5/8 after PaineWebber upgraded the stock to "buy" from "neutral."
Among other mergers vying for investors' attention, the $5.3 billion purchase of Gulfstream Aerospace (GAC) by General Dynamics (GD) sent Gulfstream shares up 4-3/4 to 60-3/8. General Dynamics fell 7-3/4, or almost 11 percent, to 63-11/16.
Shares of farming and construction equipment maker Case (CSE) soared 3-15/16 to 48-3/4 on news the company is being acquired by rival New Holland NV (NH) for $4.3 billion in cash. New Holland's American depositary shares (ADRs) eased 1-9/16 to 16.
Finally, automotive stocks took the low road after Morgan Stanley analyst Steve Girsky lowered his outlook on Ford (F) and General Motors (GM) to "neutral" from "outperform." Girsky predicted that vehicle sales would decline modestly in 1999, leading Ford shares down 2-3/4 to 58 while Dow carmaker General Motors fell 3-3/4 to 79-3/8.
-- by staff writer Malina Poshtova Zang with Robert Scott Martin
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