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Wall St. jittery
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November 16, 1999: 3:42 p.m. ET
Share prices on higher ground following Fed rate hike
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - U.S. stocks waffled in late trade Tuesday after staging a strong rally immediately following a Federal Reserve rate hike and a market friendly statement that accompanied the move.
Shortly after 3 p.m. ET, the Dow Jones industrial average rose 70.65 points to 10,831.40. On the New York Stock Exchange, gainers beat losers 1,711 to 1,357 as trading volume reached 772 million shares.
The Nasdaq composite advanced 48.36, or 1.5 percent, to 3,267.90, and the S&P 500 index gained 13.81, or nearly 1 percent, to 1,408.20. (Click here for a look at today's CNNfn hot stocks.)
The bond market retreated, with the benchmark 30-year Treasury bond losing 16/32 of a point in price, raising its yield to 6.06 percent from 6.02 percent from late Monday.
The dollar rose sharply against the yen and was little changed against the euro.
Lack of follow through buying post-Fed
The Fed increased short-term interest rates by a quarter of a percentage point to 5-1/2 percent and shifted to a neutral bias, indicating it may not raise rates again for the rest of the year.
The Fed continued the tightening process that began on June 30 and Aug. 24, when it increased interest rates each time by a quarter of a percentage point. At the last Federal Open Market Committee meeting Oct. 5, officials left rates unchanged but shifted to a tightening bias.
Although investors' initial reaction to the Fed announcement was favorable, a lack of follow through buying limited gains.
Prior to the Fed announcement, analysts said it was a close call as to whether the Fed will increase short-term interest rates, and the financial markets were in a wait-and-see mode before the Fed policy decision was released.
Barry Hyman, chief market strategist at Ehrenkrantz King Nussbaum, said either way the Fed went, it is a "win-win" situation.
"If there is no hike, the market will continue to rally. If there is a hike by a quarter point, (the market) will exact a positive response that this will be the last hike for a while," he said.
Hyman noted investors are looking beyond the Fed decision today as there are many other factors helping the market, such as the recent repeal of Depression-era banking laws.
"We will continue this bull market rally. There will be pullbacks along the way, but the bull market remains intact," he added.
Most financial shares were little changed after the rate hike. The sector is highly sensitive to interest rates, due to the stronger probability of borrowers defaulting on their loans when interest rates rise, therefore impacting corporate earnings negatively.
Among the Dow components, J.P. Morgan (JPM) rose 1-5/8 to 140 and Citigroup (C) climbed 1-9/16 to 57-7/16. However, American Express (AXP) fell 3/8 to 156-7/8.
Nasdaq marches ahead
After losing momentum Monday, technology issues resumed their climb Tuesday. Recent strength in the high-tech sector has pushed the Nasdaq to a series of record closes.
Among Nasdaq gainers, Intel (INTC) traded up 1-7/8 at 75-15/16, Cisco (CSCO) rose 3/4 to 83-9/16 and Oracle (ORCL) climbed 1/4 to 64-5/16.
But Lycos (LCOS) reversed early gains, declining 2-7/16 to 57-7/16. The Internet portal reported fiscal first-quarter earnings late Monday in line with expectations, netting $714,000 excluding amortization of intangible assets, compared with a $2.58 million loss in the year-earlier period. Following the results, Deutsche Banc Alex. Brown raised its price target on the stock to $85 from $75.
MMC Networks (MMCN) also slumped, trading down 3-1/4, or almost 15 percent, at 18-3/4 after the network chip supplier warned late Monday of a potential loss in the fourth quarter.
Pfizer gets assertive
In the latest development in the pharmaceutical merger saga between American Home Products (AHP), Pfizer (PFE) and Warner-Lambert (WLA), Pfizer said it has amended its lawsuit to stop the planned merger between American Home and Warner-Lambert. Pfizer is requesting an early hearing on its motion to enjoin the merger.
In addition, Pfizer said it forecasts continued robust revenue and earnings growth, including expectations of 16 percent revenue growth through 2002.
All three stocks sagged. American Home fell 1-9/16 to 54-5/16, Pfizer slipped 5/8 to 34-3/8 and Warner-Lambert dipped 3 to 89-3/4.
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