Unresolved Fed Leaves Stocks Mixed

Tech stocks fall but blue-chips rebound after the latest rate hike.
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Updated from 4:11 p.m. EDT

Tech stocks stumbled Wednesday as the

Federal Reserve's

refusal to commit to a future course of interest rate policy left

Cisco's

(CSCO) - Get Report

soggy guidance as the market's main catalyst.

The

Nasdaq Composite

ended down 17.51 points, or 0.75%, to 2320.74, dragged lower by a 4.3% decline in Cisco and a 2.5% decline in the Philadelphia Stock Exchange Semiconductor Index. The

Dow Jones Industrial Average

gained 2.88 points, or 0.02%, to 11,642.65, about 80 points below its all-time high, while the

S&P 500

lost 2.29 points, or 0.17%, to 1322.85.

About 1.61 billion shares traded on the

New York Stock Exchange

, with decliners beating advancers by a 9-to-7 margin. Trading volume on the Nasdaq was 2.05 billion shares, with decliners outpacing advancers 3 to 2.

Hope turned to frustration Wednesday afternoon when Fed policymakers signaled they haven't yet decided whether to pause their two-year-old rate-tightening campaign when they next meet in June. As expected, the Fed raised its official fed funds lever by a quarter-point to 5%, its highest level since mid-20001.

"We've had rally attempts based on the belief the Fed would pause," said Dave Briggs, head of equity trading with Federated Investors. "We'll have to continue to monitor incoming economic data and pay close attention. For now, though, the market is clearly disappointed."

The 10-year Treasury bond yielded 5.13%, up from 5.10% before the Fed move, while the dollar retraced some of its earlier losses against the yen and euro.

In an accompanying policy statement, the Fed left the door open for either another hike or a pause when it next meets in late June.

"The committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," it said. "In any event, the committee will respond to changes in economic prospects as needed to support the attainment of its objectives."

To view Kara Wetzel's video take on today's market, click here

.

Now, the question for traders is what will happen when members convene again in late June. Currently, interest rate futures see a roughly 45% chance of another rate hike then.

"The Fed has kept open the possibility, signaling they're not sure what to do at upcoming meetings," said Edgar Peters, chief investment officer with Pan Agora. "There is still a chance they may pause. The Fed will still be worried about resource constraint and utilization. Economic numbers will be very important leading up to the next meeting. If economic growth isn't moderating, we still may get more hikes."

Late Wednesday, the U.S. Treasury gave its foreign exchange report, saying it would not name China as a currency manipulator. However, Treasury Secretary John Snow did say that "China's international economic and exchange rate policies are deeply concerning" in an accompanying statement.

By sector, the Nasdaq Biotech index finished down 1.4% and the S&P Retail index was off 0.5%. Meanwhile, the Philadelphia Housing Sector index rose 0.8% and the Philadelphia Oil Service Sector index tacked on 0.6%.

Late Tuesday, Cisco reported adjusted earnings of 29 cents a share on sales of $7.32 billion for its third quarter, both topping estimates. A bigger-than-expected revenue contribution from Scientific Atlanta goosed the top line. For the current period, however, Cisco put overall sales at $7.85 billion, barely matching the existing Wall Street consensus.

Teva Pharmaceutical

(TEVA) - Get Report

also weighed on the Nasdaq after it swung to a charge-related first-quarter loss of $1 billion, or $1.40 a share, and adjusted earnings of 38 cents a share missed estimates. The stock slid $5.35, or 12.5%, to $37.56.

Dow component

Disney

(DIS) - Get Report

had better news, reporting a 12% rise in second-quarter profits on the strength of its television unit and theme parks. At 37 cents a share, Disney's net wiped out estimates. Sales were just short of forecasts. Shares added 53 cents, or 1.8%, to close at $30.11.

Shares of security software maker

Symantec

(SYMC) - Get Report

finished higher after the company said fourth-quarter earnings slipped from a year ago to $118.8 million, or 11 cents a share, but still beat estimates. Symantec gained 35 cents, or 2.1%, to $17.44.

Away from earnings, energy prices spiked despite a government report that showed that U.S. crude inventories unexpectedly rose 300,000 barrels last week while gasoline stocks rose by 2.4 million barrels. June crude, which is down about 5% from its peak last week, rose $1.44 to close at $72.13 a barrel in Nymex floor trading.

Precious metals were mixed after a rally Tuesday that took gold prices through the $700 level for the first time in 26 years. Gold for June delivery finished up $4.20 to $705.70 an ounce, while silver fell 18 cents at $14.28 an ounce.

In other earnings, Chinese search-engine operator

Baidu.com

(BIDU) - Get Report

reported first-quarter earnings of $4.4 million, or 13 cents an ADS, late Tuesday, beating estimates by a penny. It also reported quarterly sales of $16.9 million, tripling the year-ago amount. Baidu surged more than 36% to finish at $83.98.

Legg Mason

(LM) - Get Report

posted fiscal fourth-quarter net income of $150.1 million, or $1.03 a share, up from $117.6 million, or 98 cents, a year ago. The Thomson First Call consensus was for EPS of $1.25. The stock dropped $8.46, or 7.3%, to $108.06.

After the bell, reports are expected from

American International Group

(AIG) - Get Report

and

News Corp.

(NWS) - Get Report

.

Among ratings moves, Banc of America Securities raised

Yum! Brands

(YUM) - Get Report

to buy from neutral, citing sales growth in China and increasing U.S. margins. Elsewhere, Deutsche Securities raised its rating for

DaimlerChrysler

(DCX)

to buy from hold.

Shares of Yum! Brands climbed 95 cents, or 1.8%, to $53.65. DaimlerChrysler gained 93 cents, or 1.7%, to close at $56.94.

On Tuesday, strength in

General Motors

(GM) - Get Report

pushed the Dow up 55 points to 11,640, leaving it 83 points shy of its all-time high. The S&P 500 held at 1325, while the Nasdaq Composite fell 7 points to 2338. The Dow was supported again Wednesday by a 3.6% gain in GM.

Overseas markets were flat to lower, with London's FTSE 100 was lower by 0.4% at 6083 and Germany's Xetra DAX was off 0.4% at 6118. In Asia, Japan's Nikkei slid 1.4% overnight to 16,952, while Hong Kong's Hang Seng lost 0.3% to 17,081.