Anxiety grows over Reserve meeting

NEW YORK » Wall Street slumped yesterday as investors looked past another round of acquisitions and grew increasingly anxious about the Federal Reserve's upcoming decision on interest rates. The Dow Jones industrials tumbled more than 120 points.

With the Fed meeting today and tomorrow to discuss its rate policy, yesterday's stronger-than-expected economic data raised fears that the central bank would signal that more hikes are coming. It's nearly a foregone conclusion that the Fed will nudge rates a quarter percentage point higher; investors are worried about rate hikes in August and beyond.

A mild drop in existing home sales and an unexpected jump in consumer confidence showed the economy was moderating but remained sturdy, although investors were not consoled.

"As we look at that data, there's nothing that raises hopes that the Fed won't lift rates," said Art Hogan, chief market analyst for Jefferies & Co. In the coming sessions, "I think this market is going to bounce around in this trading range, with the path of least resistance to the downside."

While a spate of major acquisitions gave stocks a boost Monday, news that Spanish-language broadcaster Univision Communications Inc. agreed to be bought by an investor group for $12.3 billion failed to energize the market yesterday. Citizens Banking Corp. also made a $1.05 billion deal to buy Republic Bancorp Inc.

At the close, the Dow plunged 120.54, or 1.09 percent, to 10,924.74.

Broader stock indicators also fell sharply. The Standard & Poor's 500 index dropped 11.36, or 0.91 percent, to 1,239.20, and the Nasdaq composite index lost 33.42, or 1.57 percent, to 2,100.25.

Bonds recouped some of their recent losses but remained at historic lows, with the yield on the 10-year Treasury note slipping to 5.21 percent from 5.24 percent late Monday. The U.S. dollar was little changed against other major currencies; gold prices lingered near $585 an ounce.

Rising oil prices also weighed on the market, as a Gulf Coast refinery snag stoked gasoline supply concerns during the busy summer driving season. A barrel of light crude added 12 cents to $71.92 on the New York Mercantile Exchange.

At its two-day meeting, the Fed is expected to lift the nation's key short-term interest rate by a quarter percentage point to 5.25 percent. But with soaring energy costs pressuring prices elsewhere, some on Wall Street already predict another hike in August -- or the possibility of an aggressive half-point raise this week.