News vacuum puts investors on hold
NEW YORK » Wall Street pulled back sharply yesterday as a lack of economic news left investors hesitant to buy stocks ahead of the Federal Reserve's interest rate decision next week.
Falling commodity prices and some strength in the U.S. dollar eased the inflation picture, but weakness in oil- and metal-related stocks pulled the market lower. Investors also found little direction without any new economic data to feed speculation over whether the Fed will hike rates again at its two-day meeting June 28-29.
Brian Gendreau, investment strategist for ING Investment Management, said investors appeared confused about what was driving the market now that hopes for a soft landing -- for example, a gentle rise in interest rates that would contain inflation but preserve the economy's momentum -- were running dry.
"I think when you get swings like this back and forth, it's indicative of a wide divergence of opinions in the market," Gendreau said, adding that he believes the market could see sharp moves in either direction but will ultimately continue drifting sideways until there is more clarity on interest rates.
Some stocks got a boost from news of a joint venture between Nokia Corp. and Siemens AG. But the market turned lower at midday after the National Association of Home Builders said its June index of new home sales dropped to its lowest point since April 1995.
The Dow tumbled 72.44, or 0.66 percent, to 10,942.11, after sliding as much as 107 points earlier. Last week, a two-day bounce broke nearly six weeks of heavy selling and carried the Dow 1.13 percent higher for the week.
Broader stock indicators also declined. The Standard & Poor's 500 index fell 11.40, or 0.91 percent, to 1,240.14, and the Nasdaq composite index dropped 19.53, or 0.92 percent, to 2,110.42.
The U.S. dollar advanced on the Japanese yen and was flat versus European currencies. Gold prices tumbled to $570 per ounce.
Crude futures dipped despite persistent worries about a potential supply cutoff amid rising tension over Iran's nuclear arms program. A barrel of light crude slid 90 cents to settle at $68.98 on the New York Mercantile Exchange.
Trading was expected to be skittish this week with few economic reports due. Investors will likely pay attention to new home starts and weekly unemployment claims for updates on the health of the housing and job markets, but those figures will have little impact on the market's obsession with inflation and interest rates.