Stocks fall slightly after Fed raises rate
NEW YORK » Stocks fell slightly yesterday after the Federal Reserve raised interest rates as expected, exacerbating traders' ill humor following a disappointing profit forecast from Dell Inc.
The Fed's quarter-percentage-point increase in the nation's benchmark interest rate, pushing it to 4 percent, was widely anticipated. The Fed also signaled it would continue gradually raising rates, but noted that inflation has had relatively little effect on the economy in recent months.
Stocks may be falling because of sentiment on the Street that the hikes are unwarranted. This increase and the one or two expected to follow may simply serve to give Ben Bernanke, who has been nominated as the next Fed chairman, wiggle room to cut rates as a stimulus next year, said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati.
The most recent sign of a slowing economy came from PC maker Dell, which trimmed its sales and income targets for the current quarter after the close of regular trading Monday, saying sales in the United States and Britain were weak. The company also said it would take a third-quarter charge of $450 million to restructure its consumer unit and replace some faulty PC circuits.
The Dow Jones industrial average fell 33.30, or 0.32 percent, to 10,406.77.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 4.25, or 0.35 percent, to 1,202.76, while the Nasdaq composite index was dragged down by Dell, slipping 6.25, or 0.29 percent, to 2,114.05.
Bonds were lower, with the yield on the 10-year Treasury note rising to 4.58 percent from 4.55 percent late Monday. The U.S. dollar was mixed against other major currencies in European trading. Gold prices were lower.
Crude oil futures fell. A barrel of light crude was quoted at $59.85, up 9 cents, in trading on the New York Mercantile Exchange.
The nation's manufacturing activity grew at a slower pace during October as companies increasingly felt the strain of a continuing rise in energy and raw materials prices, the Institute for Supply Management said. The ISM's measure of costs, its prices index, rose to 84.0 in October from a reading of 78.0.
More broadly, concerns about inflation, natural disasters, housing prices and energy prices continue to hang over the market, said Aaron Gurwitz, a senior strategist at Lehman Brothers private investment management group.
"The problem is that we see these concerns as not getting better; they're sort of staying the same as they are or getting worse," he said.