(Updated from 4:11 p.m. EDT)
Just two days ahead of an expected interest-rate cut, investors sat this session out, sniffing around to see if the
Federal Reserve will cut interest rates by 25 or 50 basis points. Meanwhile, they got an unpalatable whiff of more negative earnings news after the close.
Trading volume was very light on both the
New York Stock Exchange and the
"The market will be directionless until the Fed announces its decision," said Seth Tobias, hedge fund manager at
Circle T Partners
. Tobias expects the central bank to cut the
fed funds rate, or the rate at which banks lend to each other overnight, by 50 basis points. "Consumer spending is holding up, but credit spreads are widening." That indicates concern about the ability of borrowers to service their debt.
Dow Jones Industrial Average fell 100.37 points, or 1%, to 10,504.22, weighed down by weakness in components
, which was hurt by a bearish article in
, which dropped after a European advisory committee opposed
purchase of the company.
Nasdaq Composite edged up 16 points, or 0.8%, to 2050.8, bolstered by its top-name components.
gained 5.7% to $18.51,
advanced 1.1% to $28.58, and
rose 5.2% to $30.50. The
S&P 500, however, fell 6.8 points, or 0.55%, to 1218.6.
Shortly after the closing bell,
Applied Micro Circuits
reduced its fiscal first-quarter outlook. The chipmaker said that revenue in the June quarter would be almost half of what analysts had been expecting. It also expects to post a loss for the quarter. Analysts had expected the company to break even. Ahead of its announcement, Applied Micro closed up 2.5% to $14.20. In after-hours trading, the company was off 8.5% to $13.
Today's mild session was dominated mainly by speculation about the Fed. The market is mixed in its expectations for monetary policy: Currently the
fed fund futures contract, which imply expectations for the fed funds rate, is pricing in 100% odds of a 25 basis point cut and a 54% chance of a 50 basis point cut. Currently, 15 of the 25 primary bond dealers who work with the Fed expect a 25 basis point cut, while 10 of them are forecasting a 50 basis point cut. Short-term interest rates are now 4%.
On an overall basis, some market analysts are optimistic: "The market is getting ready for a nice summer rally," said Michael Palazzi, managing director of trading at
CIBC World Markets
. "There are large cash reserves on the sidelines. Investors are looking for a reason to buy stocks."
In economic news,
existing home sales rose in May. Some 5.37 million new units were sold on an annual basis through May, compared with the 5.12 million forecast for the month and the 5.20 million sold on an annual basis through April.
Housing starts began to decline in May, marking the first sign of easing in what has been one of few strong areas in the slowing U.S. economy.
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closed slightly lower Monday after telecom bellwether
deflated early gains. It dropped 0.07% to 5661.90. The Paris
closed stronger, however, up 0.57% to 5213.46.
In Frankfurt, weakness in German drugmaker
put pressure on stocks. The
closed off 0.24% to 5927.32.
The euro was lately trading at $0.8608. The greenback was at 123.91 yen.
Asian markets swooped lower overnight, with a 1.14% slide on Tokyo's
. Markets were closed for holiday in Hong Kong overnight.
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