Stocks mixed before Fed rate decision
NEW YORK – Wall Street turned in a mixed performance Tuesday as investors traded cautiously ahead of the Federal Reserve’s decision today on interest rates.
The Fed, facing a faltering economy but also rising inflation, is expected to cut interest rates by a quarter point after its two-day meeting concludes today. Many investors believe policy makers will then signal that they are planning to hold rates steady for a while.
Consumers have been worried about inflation because it means energy and grocery bills are harder to pay. Wall Street also is concerned, because inflation tends to curtail consumer spending, which accounts for more than two-thirds of the U.S. economy.
The Conference Board said Tuesday its April index of consumer confidence fell for the fourth straight month. “There’s no panic out there (in the market) because of the consumer confidence numbers, but there is more concern about inflation than we had just a few weeks ago,” said Jim Herrick, director of equity trading at Baird & Co. “Everyone is interested in what the Fed will do about it.”
The Dow Jones industrial average fell 39.81, or 0.31 percent, to 12,831.94.
The biggest drag on the Dow was the component Merck & Co., which sank $4.30, or 10.4 percent, to $37.14 after saying the Food and Drug Administration refused to approve a new cholesterol drug called Cordaptive. Broader markets were mixed. The Standard & Poor’s 500 index dipped 5.43, or 0.39 percent, to 1,390.94, and the Nasdaq composite index rose 1.70, or 0.07 percent, to 2,426.10.
A pullback in oil prices Tuesday eased inflationary concerns a bit and helped keep the stock market from tumbling sharply. But some analysts say the market has been deceptively calm in recent weeks given the weakness of the economy and how consumers are struggling not only with a slumping housing and job market but also high prices.
“So far, investors have bought into the notion that the Federal Reserve has staved off a wider calamity, when in fact what they’ve done is allow financial system to stay afloat as they work down, write down, a tremendous amount of bad debt,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co.
Overseas, Japan’s Nikkei stock average rose 0.22 percent. Britain’s FTSE 100 fell 0.02 percent, Germany’s DAX index fell 0.58 percent, and France’s CAC-40 shed 0.71 percent.