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Market Update: Dow, Comp End Slightly Higher After Fed Stands Pat

<LI>J.P. Morgan, H-P weigh on blue-chip index.</LI><LI>SOX up on strong Analog earnings.</LI> <LI>Bank stocks down over bad-credit worries.</LI>
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The major indices retreated sharply from their session highs after the

Federal Open Market Committee decided to leave the

federal funds rate unchanged, but cautioned that the threat of rising inflation was greater than the danger of an economic slowdown.

The

Dow Jones Industrial Average, which rallied as high as 10,779 shortly before the FOMC released its statement, ended just a bit higher, at 10,707. Likewise, the

Nasdaq Composite Index, which hit an intraday high of 3207 an hour before the Fed spoke, ended just above the flatline, up 27 to 3165.

Some market observers thought the FOMC might declare the risks to the economy to be equally weighted, which could eventually lead the Fed to ease interest rates. Today's decision, however, revealed that the Fed will maintain its tightening bias. (

TheStreet.com's

Elizabeth Roy Stanton

covered today's news in further detail in a separate

story.)

The uncertainty of the presidential election results may have had something to do with the committee's decision to shy away from policy alterations. Given the political climate that investors have dealt with over the past week, the FOMC may have been reluctant to change its policy.

Indeed, over the past several days investors -- who have coped with uncertainty about the presidential election -- have been depending on morsels of news to make bets on the marketplace.

Earlier today, strong earnings reports from

Analog Devices

(ADI) - Get Analog Devices, Inc. Report

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and

Sycamore Networks

(SCMR)

, both released after the bell yesterday, encouraged buyers to return to technology. Shares of Analog Devices were up 14%, while Sycamore Networks was up 6.2%. The

Philadelphia Stock Exchange Semiconductor Index

boosted 3.9%.

Blue-chip components

Wal-Mart

(WMT) - Get Walmart Inc. Report

and

Procter & Gamble

(PG) - Get Procter & Gamble Company Report

remained the Dow's bright lights. Procter & Gamble was up 1.3%, while Wal-Mart was ahead 4.5%.

Blue-chippers coming out on the losing side included

J.P. Morgan

(JPM) - Get JPMorgan Chase & Co. Report

and

Hewlett-Packard

(HWP)

.

Sector Watch

Bank stocks dropped today, as concerns about exposure to bad credit spread. The

Philadelphia Stock Exchange/KBW Bank Index

dropped 3.1%. Earlier today, consumer products manufacturer

Sunbeam

(SOC)

announced that it would defer payment on its credit pact from November until April.

Shares of

First Union

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fell 2.3%, as talk among traders circled that the bank is set to take a big charge for a loan to Sunbeam. Additionally,

Goldman Sachs

cut its earnings target for

Bank of America

(BAC) - Get Bank of America Corp Report

, which dropped 8.5%. Along with lending money to BofA and

Morgan Stanley Dean Witter

(MWD)

, First Union lent a total of $1.7 billion to Sunbeam in March 1998.

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Bonds/Economy

Bonds slid a bit, but then sprang back after the Fed announced there would be no change in interest rates or its inflation outlook. There was a minority opinion that the Fed would say something to indicate that no further interest rate increases would be likely. Instead, the Fed said inflation still poses a threat to the economy.

The benchmark 10-year Treasury note was up 9/32 before the announcement. It lately was at 100 9/32, up 1/32, to yield 5.711%.

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