Stocks mixed as market digests Fed's comments
NEW YORK » Wall Street finished a volatile session mixed yesterday as investors grappled with the possibility that the Federal Reserve might not lower interest rates as much as they hope.
The stock market racheted up and down throughout the day, with Wall Street still nervous after Friday's dismal employment report. The data, which showed the first monthly decline in jobs in four years, rekindled fears about housing and credit market weakness bleeding into the overall economy and squeezing consumer spending.
Speeches from Fed officials yesterday seemed to give investors a bit more reason to be optimistic about the economy, but the officials avoided hinting at how the central bank might alter rates.
San Francisco Fed President Janet Yellen said that while market turmoil has the potential to hurt the economy, rate policy should not be used to shield investors from losses.
Dallas Fed President Rich-ard Fisher said the economy appears to be "weathering the storm," and Atlanta Fed President Dennis Lockhart said investors should consider Fri- day's unemployment report in the context of a mostly strong batch of retail sales reports.
For many investors, a rate cut after more than a year of the Fed standing pat on rates is practically a given. The debate, as they see it, is whether the Fed on Sept. 18 will reduce rates by a quarter percentage point or a half percentage point to loosen up the tight credit markets -- and also, if the central bank will continue to reduce rates as the year goes on.
The Dow Jones industrial average rose 14.47, or 0.11 per-cent, to 13,127.85, after falling 250 points on Friday and switching directions several times throughout the session Monday.
Broader stock indexes fell. The Standard & Poor's 500 index slipped 1.85, or 0.13 percent, to 1,451.70, and the Nasdaq composite index declined 6.59, or 0.26 percent, to 2,559.11. The Russell 2000 index of smaller companies fell 5.98, or 0.77 percent, to 769.81.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where consolidated volume came to 2.85 billion shares, down from 3.19 billion on Friday.
Bond prices rose as stocks slipped, pushing the yield on the benchmark 10-year Treasury note down to 4.33 percent from 4.37 percent late Friday.
Stocks experienced a short relief rally in afternoon trading after Gen. David Petraeus said to Congress that he recommended to President Bush that the drawdown of U.S. forces from Iraq start this month, said Alfred Goldman, chief market strategist at A.G. Edwards & Sons Inc. But the gains were quickly lost.
Fresh economic data was sparse yesterday. The one notable report came from the Federal Reserve, which said consumer credit rose at an annual rate of 3.7 percent in July, down from 5.9 percent in June.
Light, sweet crude futures for October delivery rose 79 cents to $77.49 a barrel on the New York Mercantile Exchange.
The dollar slipped against most other major currencies, while gold prices, which have risen sharply in recent weeks amid concerns about the strength of the U.S. dollar, extended their gains.