Stocks tumble on Fed statement

Disappointed investors sent stocks tumbling Thursday after the Federal Reserve said it would keep to its policy of raising interest rates at a “measured” pace. The decline, which took the Dow Jones industrials down nearly 100 points, left the market with a mixed performance for the second quarter.

As expected, the Fed also raised short-term rates for the ninth time in a year, boosting the federal funds rate, a key rate used by banks on overnight loans, by a quarter percentage point to 3.25 percent.

Investors had hoped the Fed’s Open Market Committee would set a time frame for ending its string of rate hikes. But the committee said it “will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability” — an indication that its focus remains limiting inflation, and that rate increases are likely.

“We get more of the same,” said Jeff Kleintop, chief investment strategist for PNC Advisers. The committee statement “doesn’t give any insight into how close the Fed is to being finished with this tightening regime,” he said.

The Dow Jones industrial average was hit harder than other indexes. It fell 99.51, or 0.96 percent, to 10,274.97.

Broader stock indicators also dropped. The Standard & Poor’s 500 index was down 8.52, or 0.71 percent, at 1,191.33 and the Nasdaq composite index lost 11.93, or 0.58 percent, to 2,056.96.

Oil prices, also a major concern on Wall Street, continued their decline from Monday’s record highs of more than $60 per barrel. Crude ended trading at $56.50, down 76 cents, on the New York Mercantile Exchange.

Bonds were higher, with the yield on the 10-year Treasury note falling to 3.94 percent in late trading from 4 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices were unchanged.

Stocks finished a turbulent second quarter with mixed results, as crude oil futures fluctuated widely and as concerns about inflation and a possible economic slowdown roiled the markets. For the second quarter, the Dow lost 2.18 percent, while the S&P gained 0.91 percent and the Nasdaq climbed 2.89 percent as technology stocks came back into vogue.

For the year, however, stocks remain lower. So far this year, the Dow is down 4.71 percent, the S&P is off 1.7 percent and the Nasdaq has dropped 5.45 percent.

With the Fed decision now behind it, Wall Street will look toward today’s release of June employment numbers, and Fed Chairman Alan Greenspan’s upcoming testimony before Congress. “That will give more color,” Kleintop said.

The Commerce Department reported a slim 0.2 percent increase in personal incomes for May, far less than April’s 0.6 percent increase. And consumer spending was unchanged in May after having risen by 0.6 percent in April. With consumer activity accounting for two-thirds of the economy, investors worried that the figures, if the start of a trend, could hurt corporate earnings.

But there were some signs of strength in the labor market as the Labor Department reported that the number of people filing new claims for unemployment benefits fell last week for a second straight week. The decline of 6,000, to a total number of new claims of 310,000, the lowest level since mid-April.

Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 1.35 billion shares, compared to 1.36 billion Wednesday.

The Russell 2000 index of smaller companies fell 3.10, or 0.48 percent, to 639.66.

Overseas, Japan’s Nikkei stock average rose 0.06 percent. In Europe, Britain’s FTSE 100 closed up 0.08 percent, France’s CAC-40 fell 0.06 percent for the session, and Germany’s DAX index gained 0.06 percent in late trading.