Wall Street falls ahead of Fed rate move

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NEW YORK -- Wall Street pulled back Tuesday as investors already uneasy ahead of the Federal Reserve's interest rate decision grew more concerned about the economy after a drop in consumer confidence.

The market has been angling for a rate cut following the Fed's half-point reduction in September, and investors expect the central bank to deliver a quarter-point cut at the conclusion of its two-day meeting on Wednesday.

But inflation remains a threat, with oil prices hitting record highs and the dollar tumbling, and there is no certainty the Fed will indeed lower rates.

Some on Wall Street fear the economy could slip into recession if rates are not lowered, given the troubles in housing and credit. The Conference Board said its gauge of consumer sentiment fell to its lowest level in two years in October, coming in at 95.6 following a revised 99.5 in September. Analysts had expected a reading of 99.5 for this month.

Some disappointing financial reports from Procter & Gamble Co. and Qwest Communications International Inc., as well as a management shake-up at Merrill Lynch & Co., exacerbated the market's uncertainty.

Merrill's chairman and chief executive, Stan O'Neal, retired Tuesday as expected after the stock brokerage last week posted the biggest quarterly loss in its 93-year history last week, but no replacement was named. Alberto Cribiore, a director since 2003, was named interim non-executive chairman.

The Dow Jones industrial average dropped 40.07, or 0.29%, to 13,830.19.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 6.52, or 0.42%, to 1,534.46, while the Nasdaq composite index lost 2.65, or 0.09%, to 2,814.79.

Treasury bond prices pared losses after the weak consumer sentiment data. The yield on the 10-year Treasury note, which moves inversely to its price, was at 4.38%, up from 4.40% earlier in the session but flat with the late Monday level.

Crude oil prices retreated $1.31 to $92.22 a barrel, after hitting a record on Monday above $93 a barrel. Gold also fell, and the dollar was mixed against other major currencies.

Merrill Lynch shares fell $1.73, or 2.6%, to $65.69 after O'Neal's announced departure.

Some corporate earnings reports disappointed investors.

Procter & Gamble was the biggest loser among the 30 Dow components after cautioning that higher commodity costs will squeeze second-quarter margins. Despite a 14% rise in fiscal first quarter profit, P&G fell $2.85, or 4%, to $68.98.

And although Qwest reported a third-quarter profit jump, its shares tumbled 73 cents, or 8.9%, to $7.45 as overall revenue dipped, and after the telecommunications company provided few details about its outlook.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 244.9 million shares.

The Russell 2000 index of smaller companies fell 2.41, or 0.29%, to 819.31.

Overseas, Britain's FTSE 100 fell 0.63%, Germany's DAX index dropped 0.43%, and France's CAC-40 dipped 0.49%. Japan's Nikkei stock average fell 0.28%, and Hong Kong's Hang Seng index rose 0.16%.
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