Stocks drop after
Fed raises rates

NEW YORK » Disappointed investors sent stocks tumbling yesterday after the Federal Reserve said it would keep to its policy of raising interest rates at a "measured" pace. The decline, which took the Dow Jones industrials down nearly 100 points, left the market with a mixed performance for the second quarter.

As expected, the Fed also raised short-term rates for the ninth time in a year, boosting the federal funds rate, a key rate used by banks on overnight loans, by a quarter percentage point to 3.25 percent.

Investors had hoped the Fed's Open Market Committee would set a time frame for ending its string of rate hikes. But the committee said it "will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability" -- an indication that its focus remains limiting inflation, and that rate increases are likely.

"We get more of the same," said Jeff Kleintop, chief investment strategist for PNC Advisers. The committee statement "doesn't give any insight into how close the Fed is to being finished with this tightening regime," he said.

The Dow Jones industrial average was hit harder than other indexes.

The Dow fell 99.51, or 0.96 percent, to 10,274.97.

Broader stock indicators also dropped. The Standard & Poor's 500 index was down 8.52, or 0.71 percent, at 1,191.33, and the Nasdaq composite index lost 11.93, or 0.58 percent, to 2,056.96.

Oil prices, also a major concern on Wall Street, extended their decline from Monday's record highs of more than $60 per barrel. Crude ended trading at $56.50, down 76 cents, on the New York Mercantile Exchange.

Bonds were higher, with the yield on the 10-year Treasury note falling to 3.92 percent from 4 percent late Wednesday.

Stocks finished a turbulent second quarter with mixed results, as crude oil futures fluctuated widely and as concerns about inflation and a possible economic slowdown roiled the markets. For the quarter, the Dow lost 2.18 percent, while the S&P gained 0.91 percent and the Nasdaq climbed 2.89 percent as technology stocks came back into vogue.

For the year, however, stocks remain lower. So far this year, the Dow is down 4.71 percent, the S&P is off 1.7 percent and the Nasdaq has dropped 5.45 percent.

With the Fed decision now behind it, Wall Street will look toward today's release of June employment numbers, and Fed Chairman Alan Greenspan's upcoming testimony before Congress.