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Dow gets mild Fed boost
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December 22, 1998: 4:58 p.m. ET
Blue chips trade higher after Fed holds interest rates steady; Nasdaq slips
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NEW YORK (CNNfn) - Blue-chip stocks settled for modest gains Tuesday after the Federal Reserve elected to hold key interest rates steady, while the Nasdaq Composite fell off its record high amid pre-holiday profit taking from large-cap technology stocks.
The Federal Open Market Committee opted to leave short-term rates unchanged, a sign the Fed believes the previous rate cuts this year provide enough fuel to keep the U.S. economy on track.
In what began as a choppy day of trading, the Dow Jones industrial average finished 55.61 points higher at 9,044.46. The Dow had climbed as high as 9,069.18 after the Fed made its announcement. Despite those gains, declines outpaced advances 1,740 to 1,251 on trading volume of 684 million shares on the New York Stock Exchange.
The Nasdaq Composite fell 17.05 to 2,120.98, while the S&P 500 index inched up 0.73 to a new record high of 1,203.57.
Elizabeth Mackay, chief investment strategist at Bear Stearns, said U.S. stocks may be in for more short-term volatility as some companies may opt to sacrifice fourth-quarter earnings in exchange for a solid start in 1999. [227K WAV] or [227K AIFF]
The Fed's decision had no effect on U.S. bonds, which remained sharply lower all day in thin trading after a sell-off in the Japanese bond market. The benchmark 30-year Treasury fell 1-10/32 points in price for a yield of 5.14 percent.
The dollar was up slightly against the German mark and sharply higher against the yen as Japanese authorities said they will reduce their bond-buying activities.
Insurance deal prospects
In individual issues, health insurance giant Cigna Corp. (CI) added 1-13/16 to 79-1/8 after company officials confirmed it is in talks involving a possible sale of its property and casualty businesses to Bermuda-based Ace Ltd. The companies expect the deal to exceed $3 billion.
Dow component IBM Corp. (IBM) helped give the index a boost, climbing 5-7/8 to 182-1/4 after Salomon Smith Barney raised its 12- to 18-month price target price to $210 to $215 from $180.
Brokerage firm AmeriTrade Holding Corp. (AMTD) shot up 13-1/8 to 34-1/8 after raising its first-quarter earnings outlook to the 9- to 11-cents-a-share range from its previous estimates of 6 cents to 7 cents.
Among the declines was Dow component Goodyear Tire & Rubber Co. (GT), which slipped 5/16 to 52 after Morgan Stanley cut its rating for the tire company to "neutral" from "strong buy."
Specialty chemicals maker W.R. Grace & Co. (GRA) lost 1-9/16 to 14-5/8 after the Securities and Exchange Commission sued the company for financial fraud in its healthcare unit, alleging Grace falsely reported its 1991-1995 financial results.
Case Corp. (CSE) dipped 5/8 to 19-13/16 after the farm-equipment maker said it increased the number of job cuts by the end of 1999 to 3,400 as part of a broad restructuring plan in the face of slow sales and diminished profit.
In the technology sector, computer maker Micron Electronics Inc. (MUEI) dropped 3-5/16 to 18-1/16 after reporting first-quarter earnings a penny ahead of Wall Street forecasts. The company's sales, however, fell from last-year's results. Micron also said it will take a $3.2-million second-quarter charge to close its direct-sales operations in Nikkei, Japan.
Finally, Apple Computer Inc. (AAPL) rose 2-15/16 to 38, boosted by a report from market research firm PC Data citing Apple's iMac as the best-selling computer in November.
(Click here for a look at today's CNNfn market movers.) 
-- by staff writer John Frederick Moore
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