|
Fed sends stocks south
|
 |
May 18, 1999: 5:09 p.m. ET
Decision to adopt a tightening bias rattles stock market, leads to losses
|
NEW YORK (CNNfn) - A decision by the Federal Reserve to leave interest rates unchanged, but to adopt a leaning toward tighter monetary policy, left U.S. stocks bruised for the day even though it came as no surprise to the market.
As soon as word of the Fed's choice reached the market, an early rally lost its steam and stock prices headed south, only to recover and finish the day just below unchanged.
The Dow Jones industrial average closed 16.52 points lower at 10,836.95, wiping out gains of nearly 80 points earlier in the day. On the New York Stock Exchange, declines took the lead over advances 1,590 to 1,362 as 742 million shares changed hands.
The Nasdaq Composite lost 3.48 points to 2,558.36 and the S&P 500 index dropped 6.17 to 1,333.32.
Few on Wall Street expected the Federal Reserve to raise interest rates at this time. But last Friday's strong consumer inflation report did increase speculation in the market that the Fed might adopt a tightening bias. The central bank's decision indicates a strong likelihood that the Fed's next move will be a rate increase.
Art Hogan, chief market analyst at Jefferies & Co., said the tightening bias does not necessarily mean the Fed is about to raise rates immediately, but he added that stocks are likely to become even more sensitive to inflationary economic data over the near term. (537K WAV) or (537K AIFF)
The bond market also dipped as soon as the results of the Fed's meeting were announced, but later recovered some of the lost ground. The benchmark 30-year Treasury bond inched up 3/32 of a point in price for a yield of 5.88 percent.
The dollar strengthened modestly against both the yen and the euro.
Financials take a slide
In the stock market, financial stocks, always sensitive to interest rate trends, headed south as soon as word of the Fed's new tightening bias reached Wall Street. The sector overcame its initial jitters, however, and finished the day mostly in positive territory.
Among the Dow components, American Express (AXP)rose 2-3/4 to 124-3/8. Brian Eisenbarth, Collins & Co. analyst, singled out the stock as the Dow's most sensitive to rate anxiety, because the company does a lot of short-term borrowing.
Fellow blue chip J.P. Morgan (JPM) eased 5/16 to 136-5/8 and Citigroup (C) edged off 15/16 to 69-1/16.
Computer makers take it in stride
The technology sector, which led Wall Street's late recovery Monday, again remained an oasis of strength, shielded from the interest rate storm by some strong earnings among high-tech leaders.
Shares of Hewlett Packard (HWP) surged 7 to 95-3/4 after the Dow component reported earnings late Monday that exceeded market expectations. Following the news, Morgan Stanley Dean Witter raised its price target for the company's stock to $110 from $90.
Fellow Dow 30 component IBM (IBM), however, inched up a mere 1/2 to 238.
On the Nasdaq, shares of Dell Computer (DELL) rose 13/16 to 44-1/16. The leading made-to-order PC maker delivered its latest quarterly results after the closing bell, with profit growing 42 percent and earnings per share meeting market expectations of 16 cents.
Elsewhere in the market, among the big retailers, shares of J.C. Penney (JCP) rallied 4-7/16 to 50-1/8 after the store chain reported earnings that beat expectations and announced a strategy to put its finances in order by getting rid of its credit card unit and putting part of its drugstore business on the market as a separately traded stock.
(Click here for a look at today's list of CNNfn's market movers.)
(Click here for a look at today's CNNfn technology stocks report.) 
-- by staff writer Malina Poshtova Zang
|
|
|
|
|
 |
|
