Stocks drift lower
before Fed meeting

NEW YORK » Nervous investors sent stocks lower yesterday as they anxiously awaited the Federal Reserve's decision on interest rates and looked past an increase in U.S. oil inventories and a solid advance in the gross domestic product.

"We're just waiting for news tomorrow," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "Traders are like kids in the back seat of the car saying, 'Are we there yet? Are we there yet?' The traders are saying, 'Is the report out? Is the report out?'"

Investors sent stocks up in early trading on falling oil prices and a Commerce Department report that the economy grew at an annual rate of 3.8 percent in the first quarter of 2005. The report's new reading on gross domestic product was a marked improvement from the 3.5 percent estimated for the quarter a month ago and matched growth in the final quarter of 2004.

But the two-day meeting of the Fed's Open Market Committee, which sets the central bank's interest rate policy, ultimately weighed on the market. The Fed's decision, and its accompanying statement assessing the economy, is expected this afternoon.

The Dow Jones industrial average fell 31.15, or 0.30 percent, to 10,374.48. The Dow gained 114.85 Tuesday.

Broader stock indicators fell slightly. The Standard & Poor's 500 index was down 1.72, or 0.14 percent, at 1,199.85 and the Nasdaq composite index fell 1.00, or 0.05 percent, to 2,068.89.

Bonds were barely changed, with the yield on the 10-year Treasury note at 3.98 percent, up from 3.97 percent late Tuesday. The U.S. dollar was down against the euro, while gold prices rose.

Wall Street has had two preoccupations in recent weeks -- interest rates and oil prices.

Most investors expect the Fed to raise rates today, the ninth rate hike in a year. More significantly, they're hoping for a sign, when the Open Market Committee releases its policy statement, that the increases will soon come to an end.

The market's anxiety about the Fed had investors ignoring a drop in crude oil prices -- an event that normally would give stocks a lift. Oil futures fell 94 cents to $57.26 a barrel on the New York Mercantile Exchange after the Energy Department reported a substantial increase in gasoline production and lesser increases in oil imports and commercial crude inventories.

The oil report did reassure stock investors that the record-high oil prices reached earlier in the week, when crude passed $60, may continue to drop and that an oil shortage doesn't look to be imminent.