Stocks mixed ahead of Fed decision
Investors put off major decisions Monday, leaving stocks mixed as Wall Street awaited the results of the first Federal Reserve rate-setting meeting chaired by Ben Bernanke.
“We’ve had a pretty good run here in anticipation that the Fed is nearly done raising interest rates,” said Mark Vitner, senior economist with Wachovia Corp. in Charlotte, N.C. “But we have a real unknown quantity in Ben Bernanke … so everyone is on Fed watch.”
The Fed Open Market Committee under Bernanke is widely expected to follow the policy of former Chairman Alan Greenspan and announce a rate increase at the end of its two-day meeting today. That would boost short-term rates one-quarter point to 4.75 percent.
Ahead of the announcement, the markets turned in a lackluster performance Monday.
The Dow Jones industrial average slid 29.86, or 0.3 percent, to 11,250.11.
Broader stock indicators were mixed. The Standard & Poor’s 500 index, which seesawed through the day, ended down 1.34, or 0.1 percent, at 1,301.61. The Nasdaq composite index advanced 2.76, or 0.1 percent, to 2,315.58.
A similar stall pattern was apparent last week as the major indexes finished narrowly mixed. For the week, the Dow Jones industrials were flat, while the Standard & Poor’s 500 fell 0.33 percent and the Nasdaq composite index gained 0.27 percent.
While the market widely expects the Fed to announce its 15th consecutive rate increase on Tuesday, investors are more focused clues to whether the Fed believes it has raised interest rates sufficiently to contain inflation or will push them still higher.
Mark Donahoe, managing director and head of equity trading at Piper Jaffray in Minneapolis, said a lot of people were “sitting on the fence waiting for the Fed.”
He added: “The question is, are they going to take the foot off the pedal in terms of tightening or do they see some inflation pressures going forward,” he said.
Kim Caughey, equity research analyst, Fort Pitt Capital Group in Pittsburgh, agreed, saying that “everything seems to be steady as she goes” until the Fed speaks.
The Russell 2000 index of smaller companies inched up 0.20, or about flat, to 754.03.
Declining shares outpaced advancing shares by about 3-to-2 on the New York Stock Exchange, where consolidated volume came to 2.04 billion shares, down from 2.47 billion on Friday.
Overseas, Japan’s Nikkei stock average closed 0.5 percent higher. Britain’s FTSE 100, Germany’s DAX index and France’s CAC-40 all closed down slightly more than 1 percent.