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.
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. (
Elizabeth Roy Stanton
covered today's news in further detail in a separate
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
, 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
Procter & Gamble
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
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
announced that it would defer payment on its credit pact from November until April.
fell 2.3%, as talk among traders circled that the bank is set to take a big charge for a loan to Sunbeam. Additionally,
cut its earnings target for
Bank of America
, which dropped 8.5%. Along with lending money to BofA and
Morgan Stanley Dean Witter
, First Union lent a total of $1.7 billion to Sunbeam in March 1998.
Back to top
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%.
Back to top