Star-Bulletin news services
Investor pessimism
brings stocks down
NEW YORK >> Investor ennui pushed stocks lower yesterday as Wall Street nervously awaited a key decision on interest rates, the transfer of power in Iraq and next month's second-quarter earnings.
Until the final hour of trading, the markets saw low volatility, light volume and very little conviction ahead of next week's Federal Reserve meeting, during which the Fed's Open Market Committee is expected to decide on an interest rate hike.
Investors were also looking to the June 30 handover of power in Iraq, hoping tensions would start to ease there. Many also awaited second-quarter-earnings, expected next month.
"On the one hand we have some positive earnings to look forward to, but on the other, we have these interest rate questions and the geopolitical risks," said Keith Keenan, vice president of institutional trading at Wall Street Access. "But all that means this week is that we're in a holding pattern. There's just no motivation on the part of buyers or sellers."
The Dow Jones industrial average fell 44.94, or 0.4 percent, to 10,371.47. The Dow had traded in a narrow range off Friday's close for most of the day until investor pessimism sent stocks lower at the end of the day.
Broader stock indicators were moderately lower. The Standard & Poor's 500 index was down 4.72, or 0.4 percent, at 1,130.30, and the Nasdaq composite index lost 12.35, or 0.6 percent, to 1,974.38.
The price of the Treasury's 10-year note closed up732 point, while its yield fell to 4.68 percent from 4.71 percent Friday. Two-year Treasury notes rose116 point and yielded 2.74 percent, down from 2.78 percent Friday.
Most investors expected the Fed to make a quarter percentage point increase in the benchmark rate, currently at a 43-year low of 1 percent, which some analysts think could prompt a rally through the summer months. The possibility of a half-point raise -- or, more unlikely, no increase at all -- would likely roil the markets instead of providing a boost to stock prices.
The financial sector continued to see a great deal of merger activity. This time, Wachovia Corp. announced it would purchase rival bank SouthTrust Corp. in a deal valued at $14.3 billion. The deal would give Wachovia a strong footing in the South. Wachovia dropped $1.98 to $45.02, while SouthTrust jumped $4.57, or 13 percent, to $39.37.
"This was widely rumored, so when Wachovia announced it, it wasn't a huge impact," said Brian Pears, head equity trader at Victory Capital Management. "There was a little spillover into smaller banks that could be takeover targets, but not a huge amount. I think that's an acknowledgment of how hard it is to extract value from these deals."
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