Tucson CitizenTucson Citizen

Wall Street gives up some gains ahead of Fed news

NEW YORK – Stocks gave back some of their recent gains Wednesday as investors waited for results from the Federal Reserve’s meeting on interest rates.

The Fed is expected to leave rates at their historically low levels, but the market is anxious to see how the central bank assesses the economy in its statement accompanying the rate decision. Investors also want to know if the Fed has any further moves planned to help boost the economy. The Fed news is expected at midafternoon.

Joe Clark, managing partner at Financial Enhancement Group, said the market’s reactions to Fed meetings have been tempered in recent months because the government has taken so many steps to help revive the economy since the credit crisis began last fall.

In corporate news, International Business Machines Corp. is in discussions to buy Sun Microsystems Inc. for at least $6.5 billion in cash, in a potentially positive sign for the economy as companies become more aggressive in making acquisitions.

In late morning trading, the Dow Jones industrial average fell 83.71, or 1.13 percent, to 7,311.99. The Standard & Poor’s 500 index fell 6.00, or 0.77 percent, to 772.12, while Nasdaq composite index fell 3.52, or 0.24 percent, to 1,458.59.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 428 million shares.

Nicholas Colas, chief market strategist at BNY ConvergEx Group, said markets are also likely retreating as investors take some profits from the recent surge.

Stocks had their fifth advance in six days Tuesday after a surprisingly strong report on home construction and building permit applications. Since the rally began last week, the Dow is up 849 points, or 13 percent.

Shares of IBM fell $2.55, or 2.7 percent, to $90.36. Sun shares skyrocketed on the possible takeover news, rising $3.18, or 64 percent, to $8.15.

The Russell 2000 index of smaller companies fell 0.90, or 0.22 percent, to 402.69.

Financial stocks, which had helped lead the rally over the past week, rose again. The KBW Bank Index, which tracks 24 of the nation’s largest banks, rose nearly 2 percent, to 27.63.

Bank of America Corp. was helping lead other banks higher. Its shares rose 52 cents, or 8.3 percent, to $6.79 after reports its chief executive, Ken Lewis, said it could repay the government’s $45 billion investment as early as this year.

Gains by companies like Bank of America or Citigroup Inc. during an overall down day in the market is a very positive sign, Colas said. “Traditionally banks rally first,” he said.

Citi shares jumped 60 cents, or 23.9 percent, to $3.11.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.95 percent from 3.01 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.23 percent from 0.22 percent late Tuesday.

Investors appeared little fazed by the Labor Department’s report that the consumer price index rose 0.4 percent in February, just above the 0.3 percent expected by economists polled by Thomson Reuters. A jump in gasoline prices was the primary reason for the increase in prices paid by consumers during the month.

Core inflation, which excludes food and energy, rose 0.2 percent in February, slightly higher than the 0.1 percent economists expected.

The dollar mostly fell against other major currencies, while gold prices also fell.

An unexpected build in gasoline inventories helped send oil prices lower. Oil prices declined $1.66 to $47.50 per barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average rose 0.3 percent. In afternoon trading, Britain’s FTSE 100 fell 1.9 percent, Germany’s DAX index fell 0.4 percent, and France’s CAC-40 declined 1.6 percent.


On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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