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Stocks slip as FOMC nears
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June 30, 1999: 11:50 a.m. ET
Looming interest rate announcement leaves Wall St. sliding off balance
By Staff Writers Malina Poshtova Zang and Robert Scott Martin
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NEW YORK (CNNfn) - Interest rate nerves kept Wall Street under pressure Wednesday morning, as few buyers seemed willing to venture into the market scant hours before the Federal Reserve announced a long-awaited rate decision.
The Fed's policy-making Federal Open Market Committee is in the second day of a meeting that is widely expected to result in a small increase in short-term interest rates. Market watchers expect the central bank to raise the fed funds rate, the rate at which banks make overnight loans to each other, a quarter of a percentage point to 5 percent.
Shortly before 11:30 a.m. ET the Dow Jones industrial average was 48.76 points lower at 10,766.59. On the New York Stock Exchange, declines edged ahead of advances 1,460 to 1,172 as 262 million shares changed hands.
The Nasdaq Composite lost 10.68 to 2,631.43 and the S&P 500 index eased 9.39 to 1,342.06. (Click here for a look at today's list of CNNfn's market movers.)
The bond market also traded lower after the Chicago-area component of the National Association of Purchasing Management index surged to 60 in May from 57.9, indicating continuing growth in the manufacturing sector. The news was discomforting for the expansion-wary bond market, pushing the bellwether 30-year Treasury bond down 17/32 of a point in price to yield 6.10 percent.
The dollar eased slightly against both the yen and the euro.
Eyes on the bottom line
In the stock market, investors, already braced for higher interest rates, focused on the latest news about corporate earnings instead.
Among the newsmakers, shares of FDX (FDX), parent of delivery service Federal Express, fell 1-5/8 to 53-1/2 even after the company reported record fiscal fourth-quarter profit, beating consensus market estimates. But market players already had driven the stock higher in the past few days in anticipation of the strong results, and so were quick to take profits.
Shares of entertainment and media conglomerate Disney (DIS), a Dow component, fell 5/8 to 29-1/2 after Merrill Lynch lowered its fiscal 1999 earnings estimate for the company to 65 cents per share from 73 cents. Merrill also trimmed its 2000 earnings projections on Disney to 80 cents per share from 90 cents.
On the sunny side of Wall Street, shares of fellow Dow component Coca Cola (KO), which has been plagued by a contamination scandal in Europe, gained 13/16 to 62 even after the company said its second-quarter results will suffer damage from the European tainted Coke scare.
Telecoms tumble
Shares of large telecommunications companies went into retreat following a Wall Street Journal report that the U.S. Justice Department is investigating whether the undersea cable business unfairly excludes smaller firms.
Among the global companies named in the report, MCI WorldCom (WCOM) fell 5-3/8 to 88-1/4 and Sprint (FON) lost 1-7/16 to 53-5/8. Dow communications company AT&T (T) eased 34 to 54-7/8.
Frontier (FRO) shares edged up 1/2 to 58-5/8 after the telecom provider said a $12 billion takeover bid from Qwest (QWST) may be superior to a previous near-$12 billion offer from Global Crossing (GBLX). Investors applauded both prospective buyers, sending shares of Qwest up 11/16 to 33-9/16 while Global Crossing rose 1-5/16 to 43-13/16.
Elsewhere in the communications industry, shares of telecom equipment maker Tellabs (TLAB) tumbled 2-9/16 to 66-13/16 after it said it would buy privately held data-networking firm NetCore Systems for $575 million in stock.
Finally, among other stocks moving on the news of deals, shares of Internet venture capital firm CMGI (CMGI) climbed 4 to 114-5/16 after the company late Tuesday sealed the purchase of most of Compaq 's (CPQ) AltaVista Internet search engine in a $2.3 billions stock swap. Compaq's shares eased 1/16 to 23-5/16.
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