Investors uninspired
by Fed rate cut

The Dow falls 4.36 and the
Nasdaq rises 3.80 after the
half-percentage point reduction

By Lisa Singhania
Associated Press

NEW YORK >> Wall Street got the interest-rate cut it had been hoping for today, but that wasn't enough to put investors in a buying mood.

Instead, the market ended the session virtually unchanged, with blue chips falling slightly and tech issues managing a small gain. Analysts attributed the lukewarm reaction to the fact the reduction was expected, as well as broader concerns about still-weak business conditions.

The Dow Jones industrial average closed down 4.36 at 10,872.97, recovering some ground from its losses earlier in the day.

The Nasdaq composite index rose 3.80 to 2,085.72 while the Standard & Poor's 500 index advanced 0.52 to 1,249.44.

Advancers led decliners 3 to 2 on the New York Stock Exchange, with 1,899 up, 1,176 down and 231 unchanged. NYSE volume came to 1.04 billion shares vs. 858.27 million yesterday, which was the lowest volume day of 2001 for both the NYSE and Nasdaq Stock Market.

The NYSE composite index rose 0.90 to 637.43, the American Stock Exchange composite index gained 6.22 to 946.43 and the Russell 2000 index was up 2.99 at 489.63.

The Treasury's 10-year note fell 20/32 to 96 7/32; its yield rose 9 basis points to 5.51 percent. The 30-year bond dropped 29/32 to 92 17/32; its yield rose 7 basis points to 5.91 percent.

"The market got what is was expecting, so this is basically a nonevent," said Matt Brown, head of equity management at Wilmington Trust. "The good news is that with five interest rate cuts in 412 months, we've now got the wind at our back. The second quarter should still be weak but we're very confident the economy will start to improve this fall."

The Fed indicated its decision today to lower interest rates by a half point was due to concerns about various drags on the economy, including a decline in business investment in new equipment. But the rate reduction failed to spark a strong rally on Wall Street, as many previous announcements have done. Although the major stock indexes did advance on the Fed's move, those gains faded as the session wore on.

In the technology sector, Microsoft fell 45 cents to $68.27, while Texas Instruments rose 24 cents to $37.03 after reiterating a second-quarter outlook that includes double-digit revenue losses.

Retailing, manufacturing and other nontechnology issues were also mixed. Wal-Mart slipped $2.35 to $52 after meeting previously reduced expectations for its first quarter.

But Citigroup rose 45 cents to $50.55, while Home Depot gained 95 cents to $50.10 after it announced an unexpected rise in quarterly earnings.

The Fed's move was closely watched because, in the absence of strong profits or other encouraging news, Wall Street has been increasingly looking to interest rate cuts as a catalyst on which to rally. As a result, the markets traded in a narrow range for much of the week leading up to the Fed's announcement. Investors were also unnerved by speculation that the Fed would cut rates by less than a half percentage point.

Now the market must look for other good news to advance on, but analysts say that might not come along for a while.

Pre-announcements for second-quarter results, which are expected to be weak, will start rolling in next month. And no one knows whether the Fed will cut rates again, although the statement issued today suggests that the action is not out of the question.

"I thought their statement was surprisingly aggressive. They said that they may lower rates again if conditions continue to deteriorate," said Bill Barker, investment strategy consultant at Dain Rauscher. "But we've got six weeks until their next meeting with the unlikely prospect of an intrameeting cut before then."

After the market closed, Applied Materials, the biggest maker of semiconductor equipment, said fiscal second-quarter profit fell because chipmakers ordered fewer tools as demand slumped. Profit from operations for the period ended April 29 fell to $269 million, or 32 cents a share, from net income of $468.9 million, or 54 cents, a year earlier. Analysts were expecting 33 cents a share.