Updated from 4:03 p.m. EDT
Stocks closed well below their best levels of the session Tuesday after the
Federal Open Market Committee's decided to leave interest rates unchanged.
Dow Jones Industrial Average finished with a gain of 28.51 points, 0.3%, to 9836.55. The
Nasdaq lost 4.66 points, or 0.3%, to 1573.82, and the
S&P 500 fell 3.18 points to 1049.49.
Market participants initially had a fairly muted response to the outcome of the FOMC meeting this afternoon, as the results were pretty much what was expected, but the averages weakened as the close of trading approached. The
federal funds target rate remained unchanged at 1.75%. The Fed's policymaking arm reiterated its previous comments, saying recent economic reports have signaled a recovery is under way, but the pace of the economy's resurgence is still uncertain.
Earlier in the session investors cheered the latest
productivity numbers. The Labor Department said productivity increased 8.6% in the first quarter on annualized basis, well ahead of the consensus estimate of a 7% increase, and the highest upsurge since the second quarter of 1983.
First-quarter unit labor costs fell 5.4%, compared with a revised 3.1% drop in the fourth quarter, and also better than expectations. The market typically cheers increased productivity and slower unit labor costs because they point to tame inflation.
Wall Street wasn't short on news from the technology sector as several high-profile companies were making headlines.
new chief executive, Samuel Palmisano, offered a gloomy forecast for technology spending to the company's employees late last month, and he suggested Big Blue will look for ways to cut costs, according to
The Wall Street Journal
. Shares of IBM traded up 0.7% to $76.50, after striking a 52-week low of $75.92 earlier in the day.
, the world's largest software company, agreed to acquire Danish enterprise software outfit
for about $1.33 billion in cash or stock. Shares of Microsoft added 1.8% to $49.47.
Elsewhere in the software industry,
announced the resignation of President and Chief Operating Officer Dennis Jones and Chief Financial Officer Peter Pervere in the wake of a horrible quarter for the business-to-business software provider. The company's shares lost 14% to 82 cents and are down more than 75% year to date.
was under pressure early on but closed higher by 10% to $12.53 after warning that revenue would fall short of expectations in the coming months.
Several other companies issued earnings reports before the bell. Oil services firm
recorded a drop in first-quarter earnings, citing a slowdown in oil and gas drilling activity in North America and one-time charges related to asbestos claims. The company posted net income of $22 million, or 5 cents a share, compared with $109 million, or 25 cents a share, in the year-ago period. Excluding several one-time items, the company earned $83 million, or 19 cents a share, matching analysts' expectations. Revenue fell 4.4% to $3 billion.
inched up 0.8% to $26.05 on the heels of its first-quarter earnings, which fell short of analysts' projections. The company posted net income of $138 million, or 22 cents a share, compared with $124 million, or 20 cents a share, a year earlier. Analysts were expecting earnings of 26 cents.
Food distribution company
said its quarterly earnings rose almost 60%. The company, which has been hit by the
bankruptcy, posted net income of $24.6 million, or 52 cents a share, up from $15.5 million, or 37 cents a share, a year earlier. Excluding its Kmart exposure, Fleming earned 57 cents a share, topping analysts' forecasts by 5 cents. The company also said it would incur a $25 million charge in the second quarter related to expected acquisitions. The stock gained 11%.
On the research front, Merrill Lynch lowered its intermediate-term investment rating on
to neutral from buy, saying it expects the stock to trade sideways for the next few weeks because of the delay of its 10-K filing, a restatement of earnings dating back to 1997, and uncertainty about its financing situation. Shares of the copier manufacturer lost 3% at $7.50.
Separately, Goldman Sachs raised its 2002 estimates on credit card issuer
a day after the company posted a small first-quarter profit and set plans to cut more jobs. The stock jumped 9% to $6.89.
U.S. Treasury issues were higher late in the afternoon. The 10-year note was up 2/32 at 98 20/32, yielding 5.05%. Shorter-term issues were higher and the long bond were also a little stronger.
Overseas markets were mostly lower. London's FTSE 100 was down 1.6% to 5120, and Germany's Xetra DAX was off 0.2% to 4872. Japan's Nikkei 225 finished down 2% at 11,316, while Hong Kong's Hang Seng added 0.5% to 11,796.