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Stocks Tumble as Fed
Policy Makers Meet

By Jennifer Shaw  Reuters
NEW YORK — Stocks stumbled Tuesday on talk the Federal Reserve's policy setters could be having second thoughts about lowering interest rates after last year's series of cuts fueled a speculative buying frenzy on Wall Street.

The Dow Jones industrial average ended down 71.58 points, or 0.7 percent, at 9,274.12. In the broader market, declining issues swamped advances 1,904 to 1,104 on active volume of 835 million shares on the New York Stock Exchange.

The technology-laced NASDAQ composite index slumped 46.67 points, or 1.8 percent, to 2,463.42, a day after setting its third straight record.

Wall Street was unwilling to extend January's run-up, which had propelled all of the major market indexes to new highs.

"Over the last few days we had seen institutional support, which we are not seeing today," said George Rodriguez, senior vice president at Guzman & Co.

There was concern the Fed in its first policy-setting meeting of 1999, which started Tuesday, may have run out of reasons to lower interest rates because of evidence the economic growth will continue to be positive this year.

"People are starting to conclude that the Fed is not a friendly force," said Bill Meehan, chief market analyst at Cantor, Fitzgerald.

Late last year, the central bank lowered rates three times for fear that the economic crisis outside of the United States could drag down the economy. But it underestimated the strength of the economy, and fueled a run-up in stock prices.

The Fed last lowered interest rates at its Nov. 17 meeting, but it warned that Wall Street should not look for further monetary easing unless there were signs that the economy was slowing.

The betting is that the Fed will leave rates untouched at this week's meeting.

All 28 analysts polled by Reuters expected the Fed to keep the 4.75 percent federal funds rate unchanged. The FOMC holds two-day meetings twice a year ahead of the Fed Chairman's Congressional testimony on the economic outlook in February and July.

Peter Cardillo, director of research at Westfalia Investments said that although Fed policy makers are not expected to change interest rate policy at their first meeting of the year, Wall Street will be relieved when the two-day session finishes Wednesday.

The FOMC is expected to make an announcement on what it has decided at around 2:15 p.m.

Meanwhile, the technology sector took a big hit.

"You have the beginning of some level of fear among Internet traders that maybe they can't keep buying the dip [and then seeing the shares rise]," said Rick Meckler, senior managing director at Liberty View, a specialty investment firm in Jersey City, N.J.

He said the tech sell-off was also fueled by concerns over the Microsoft Corp. antitrust case and sentiment that Amazon.com Inc. and Yahoo! Inc. "could see their gains capped."

Amazon was off 5 5/8 at 110 1/4 and Yahoo! was down 12 10/16 at 322 15/16.

Among stocks in the news, Perot Systems Corp., the company that is controlled by former U.S. presidential candidate Ross Perot, jumped 26 1/2 to 42 1/2 in its Wall Street debut. The Dallas-based firm, the sixth-largest provider of outsourced information technology, priced its stock at $16 a share Monday night.

Among the tech stocks, Intel Corp. fell 3 1/4 to 134 5/8, and Microsoft was down 5 5/16 at 167 5/8. Cisco Systems lost 2 39/64 to 112 25/64, and Tech Data fell 11 1/2 to 20 5/16.

Polo Ralph Lauren Corp. was off 2 5/16 at 22 1/4 after the upscale fashion retailer reported disappointing results and announced store closings and job cuts.

In the telecommunications sector, Sprint Corp. fell 2 4/16 to 81 15/16 after the company's earnings fell short of Wall Street estimates.

The Standard & Poor's composite index of 500 stocks fell 11.01 points to 1,261.99. The American Stock Exchange index was down 3 at 709.63.

The NYSE Composite index of all listed common stocks fell 3.36 to 594.10. The average share was down 26 cents.

The Wilshire Associates Equity Index — the market value of NYSE, American and NASDAQ issues — was 11,588.713, down 101.141, or 0.8 percent.

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