Stocks simmer ahead
of expected rate hike

NEW YORK » Stocks barely budged yesterday while investors awaited the Federal Reserve's decision on interest rates and while they digested troubling developments at insurance broker Marsh & McLennan Cos. and drugmaker Merck & Co.

While the Fed's policy committee is expected to boost interest rates again at today's meeting as another pre-emptive strike against inflation, questions remain over what signals the central bank might issue on the overall economy in its policy statement.

Robert Christian, chief investment officer at Wilmington Trust Co., said the market had already factored in a rate increase but was anxious about what the Fed might say about the economy, including the inflationary impact of the dollar's recent decline. A weaker dollar makes imports more expensive.

"The issue is going to be the rhetoric they use around the rate increase," Christian said.

Some investors, he said, are worried that the dollar's fall might prompt the Fed to move more aggressively than it would otherwise. Higher rates would make U.S. investments more attractive, helping boost demand for the dollar versus other currencies.

The Dow Jones industrial average was down 4.94, or 0.05 percent, at 10,386.37.

Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index slipped 0.81, or 0.07 percent, to 1,164.08, while the Nasdaq composite index was up 4.08, or 0.2 percent, at 2,043.33.

The market's unease was tempered by a strong drop in crude oil futures, which continued their abrupt downward trend of recent weeks. A barrel of light crude settled at $47.37, down $1.72, on the New York Mercantile Exchange.

Marsh & McLennan was down 56 cents at $26.80 after the company posted disappointing quarterly results and said it would cut 3,000 jobs, or about 5 percent of its work force, amid the continuing fallout over charges of insurance bid-rigging by New York Attorney General Eliot Spitzer.

Marsh also said it had reached a tentative $40 million settlement with the Securities and Exchange Commission over questionable brokerage allocation practices at its asset management firm, Putnam.

Merck was down 57 cents at $26 as the Dow's biggest decliner after disclosing late Monday that the Securities and Exchange Commission and the U.S. Justice Department were examining the company's handling of Vioxx. Merck recently pulled the leading arthritis drug off the market after studies showed it increased the risk of heart attacks.