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
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
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
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
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
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.