Market report: Big gains fall victim to profit-taking

NEW YORK – A still-anxious Wall Street closed lower Wednesday, sacrificing the advance it made after the Federal Reserve cut interest rates half a percentage point. Investors collected profits after nearly three sessions of big gains, unwilling to leave money on the table amid ongoing economic uncertainty.

It wasn’t surprising that the market pulled back, having suffered months of losses and having driven the Dow Jones industrials up more than 470 points this week ahead of the late-day downturn.

Anthony Conroy, managing director and head trader for BNY ConvergEx Group, said expectations of more downgrades of bond insurers such as Ambac Financial Group Inc. and MBIA Inc. – as well as uneasiness ahead of today’s Commerce Department report on personal income and spending inflation – was enough to spur people to cash in profits from the market’s initial gains.

Key reports on the job market and manufacturing set to arrive Friday could also add to investors’ concerns about the state of the economy, which has been dragged down by a crumbling housing market and losses at major financial institutions.

The Federal Reserve lowered the fed funds rate, or the interest banks pay one another for overnight loans, to 3 percent, the lowest level since spring 2005. It also lowered the discount rate, or the interest the Fed charges on loans to banks, by a half-point to 3.50 percent.

Scott Fullman, director of investment strategy for I.A. Englander & Co., said it was unlikely the market’s downturn was because of disappointment over the rate cut or the Fed’s accompanying statement, which if anything asserted that the central bank is willing to lower rates further if needed.

The Dow, which had been up more than 200 points after the Fed’s decision, finished down 37.47, or 0.30 percent, at 12,442.83.

“We’re seeing profit taking ahead of the employment report on Friday,” Fullman said, referring to the Labor Department’s data on job creation and unemployment. “The market has had a really nice run-up this week, and investors are taking advantage of that.”

Broader stock indicators also turned lower. The Standard & Poor’s 500 index fell 6.49, or 0.48 percent, to 1,355.81, and the Nasdaq composite index fell 9.06, or 0.38 percent, to 2,349.00.

Government bond prices rose as the stock market pulled back. The yield on the 10-year benchmark note fell to 3.63 percent from 3.68 percent late Tuesday.

Overseas markets closed lower ahead of the U.S. rate decision. In Tokyo, the Nikkei fell 0.99 percent. In Europe, London’s FTSE 100 dropped 0.81 percent, Paris’ CAC 40 lost 1.37 percent and Frankfurt’s DAX fell 0.26 percent.