Yesterday, investors counted on a 50-basis-point rate increase from the Fed to ignite a rally on Wall Street. After all, it was thought to be the worst-case scenario, and most players thought the market was already priced for it. But it wasn't that easy. During the FOMC get-together, Greenspan and friends spouted off cautious comments on future rate increases. Even the optimistic Murphy found out that anything that can go wrong will, and often does.
The Fed's ominous warning of future rate increases left investors today picking up where they left off yesterday. Since the market isn't out of the woods yet, many insiders are just taking a wait-and-see approach before putting any more money to work in stocks.
"It's another low-volume day, no one really in the casinos for the last couple of weeks," said Ronny Kraft, principal at
. "It's as if they come to see economic numbers but then leave without stopping at the tables."
"Greenspan didn't take any uncertainty out of the market," said Patrick Boyle, director of trading at
Credit Suisse First Boston
. "They sold off the market at the open and it has stayed here all day. The customer base is on the sidelines."
Dow Jones Industrial Average finished the session down 164.83, or 1.5%, to 10,769.74, with tech giant
floundering 5.6% despite posting second-quarter earnings that topped the consensus estimate by a nickel. Its spinoff
fell in sympathy, ending down 10 1/2, or 11.8%, to 78.
H-P's losses weren't shocking to all investors. In fact, Kraft expected the reaction, after seeing many companies trade down after posting strong results. "The reaction to Hewlett-Packard's earnings has been par for the course," he said. "One of the most important qualitative factors of a bear market is that the markets don't rally on good news." Kraft also noted institutional investors' habit of using positive earnings as an exit because "the good news is already factored into the stock."
also fell, but
made a comeback, ending up 1 5/16 to 123 3/16, after it set a 2-for-1 stock split.
Elsewhere on the
NYSE, the interest-rate-sensitive retailers were on sale. The
S&P Retail Index
slipped 2.4%. Despite receiving a price-target upgrade from
Credit Suisse First Boston
both suffered losses during the session.
Traditionally, the financial stocks trade lower during in higher rate environment. But in today's market, history isn't repeating itself. The financials didn't succumb to yesterdays hike, if fact, some finished the session on the upside. "Institutions aren't really liquidating big positions," said James Maguire Jr., managing director at
, suggesting why financials didn't take too much of a hit.
, which spent most of the session up more than 1 point, closed up 11/16 to 132 5/8.
also finished in positive territory.
Nasdaq Composite Index fell 72.61, or 2%, to 3644.96.
Nasdaq Stock Market
was the lead dragger, ending off 15, or 20.6%, to 57 19/32, after announcing a $125 billion deal with
and receiving a downgrade from
In other tech news,
TheStreet.com Internet Sector
index, which includes Lycos, closed down 16.04, or 1.7%, to 913.58, with further losses from
Philadelphia Stock Exchange Semiconductor Index
both felt some profit-taking.
S&P 500 stumbled 18.24, or 1.2%, to 1447.80, while the small-cap
Russell 2000 skidded 6.32, or 1.3%, to 499.66.
Breadth was negative on both the Big Board and the Nasdaq on moderate volume.
New York Stock Exchange:
1,000 advancers, 1,882 decliners, 824.7 million shares. 39 new 52-week highs, 60 new lows.
Nasdaq Stock Market:
1,470 advancers, 2,511 decliners, 1.204 billion shares. 24 new highs, 92 new lows.
For a look at stocks in the news, see the Company Report, published separately.