Stocks end flat after Fed gives its outlook
NEW YORK » Stocks finished flat yesterday after the Federal Reserve said the economy appeared to be growing at a "moderate" pace but offered a somewhat cautious reading on inflation.
The central bank, which stood pat on short-term interest rates as had been widely expected, issued a largely unchanged assessment of the economy, saying its primary concern remains the risk that inflation will fail to moderate.
Stocks bounced around as investors tried to interpret the Fed's comment that recent readings on inflation excluding energy and food prices showed some improvement but no "sustained" signals of easing.
"They took a middle-of-the-road approach. The Fed said some encouraging things about the future growth rate of the economy," said John Miller, head of fund management for Nuveen Asset Management.
He contends, however, that the Fed, which left rates unchanged at 5.25 percent as it has for the past year, was careful to remain guarded about inflation.
The Dow Jones industrial average, which at one point had been up 70 points after the Fed decision, ended down 5.45, or 0.04 percent, at 13,422.28.
Broader stock indicators finished mixed. The Standard & Poor's 500 index slipped 0.63, or 0.04 percent, to 1,505.71, and the Nasdaq composite index rose 3.02, or 0.12 percent, to 2,608.37.
Bonds fell after the Fed comments, with the yield on the benchmark 10-year Treasury note rising to 5.11 percent from 5.08 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 2.93 billion shares compared with 3.35 billion traded Wednesday.
The Russell 2000 index of smaller companies rose 0.57, or 0.07 percent, to 839.03.
The modest moves in stocks yesterday follow a rally by all three major indexes in the previous session. Stocks have been turbulent during the past few weeks because of soaring bond yields and concern about the broader effect of faltering subprime loans.
Wall Street's focus on the Fed's comments left little room for attention elsewhere; investors appeared unfazed as oil prices spiked above $70 per barrel on the New York Mercantile Exchange for the first time since August, then fell back.
Oil prices began moving up Wednesday after a government report showed an unexpected drop in gasoline inventories. Light, sweet crude rose 60 cents to close at $69.57 yesterday.
In corporate news, shares of General Motors Corp. rose to a two-year high after agreeing to sell its Allison Transmission commercial and military business to an investment conglomerate and a private equity firm. The stock was the best performer in the Dow, rising 74 cents, or 2 percent, to $38.15.
Dillard's Inc. rose $2.76, or 8.1 percent, to $36.69 after an investment group representing minority shareholders said it plans to press the department store chain to boost profits.
Digital River fell $5.67, or 11 percent, to $45 after the e-commerce outsourcing company cut its second-quarter and full-year forecasts.\