Investor apathy pushed stocks lower today as Wall Street nervously awaited a key decision on interest rates, the transfer of power in Iraq and next month’s second-quarter earnings.
Until the final hour of trading, the markets saw low volatility, light volume and very little conviction ahead of next week’s Federal Reserve meeting, during which the Fed’s Open Market Committee was expected to decide on an interest rate hike.
Investors were also looking to the June 30 handover of power in Iraq, hoping tensions would start to ease there. Many also awaited second quarter earnings, expected next month.
“On the one hand we have some positive earnings to look forward to, but on the other, we have these interest rate questions and the geopolitical risks,” said Keith Keenan, vice president of institutional trading at Wall Street Access.
“But all that means this week is that we’re in a holding pattern. There’s just no motivation on the part of buyers or sellers.”
The Dow Jones industrial average fell 44.94, or 0.4%, to 10,371.47. The Dow had traded in a narrow range off Friday’s close for most of the day until investor pessimism sent stocks lower at the end of the day.
Broader stock indicators were moderately lower. The Standard & Poor’s 500 index was down 4.70, or 0.4%, at 1,130.32, and the Nasdaq composite index lost 12.35, or 0.6%, to 1,974.38.
Most investors expected the Fed to make a quarter percentage point hike in the benchmark rate, currently at a 43-year low of 1 percent, which some analysts think could prompt a rally through the summer months. The possibility of a half-point raise – or, more unlikely, no hike at all – would likely roil the markets instead of providing a boost to stock prices.
The financial sector continued to see a great deal of merger activity. This time, Wachovia Corp. announced it would purchase rival bank SouthTrust Corp. in a deal valued at 14.3 billion dollars.
The deal would give Wachovia a strong footing in the South. Wachovia dropped 1.98 dollars to 45.02 dollars, while SouthTrust jumped 4.57 dollars, or 13%, to 39.37 dollars.
“This was widely rumoured, so when Wachovia announced it, it wasn’t a huge impact,” said Brian Pears, head equity trader at Victory Capital Management. “There was a little spillover into smaller banks that could be takeover targets, but not a huge amount. I think that’s an acknowledgement of how hard it is to extract value from these deals.”
Simon Property Group Inc., North America’s largest shopping mall owner, fell 32 cents to 51.98 dollars after it said it would buy Chelsea Property Group, which operates 60 outlet centres and shopping malls, for about 3.5 billion dollars. Chelsea surged 7.01 dollars to 65.25 dollars.
Monsanto Co. boosted its quarterly and yearly earnings outlook, crediting tax cuts and a good growing season for its agricultural products. Monsanto was up 27 cents at 35.69 dollars.
Walgreen Co. rose 87 cents to 35.77 dollars after beating Wall Street estimates by a penny on its latest quarterly earnings report. The drugstore chain said cost cutting and a jump in prescription drug sales fuelled its gains.
Goodyear Tire & Rubber Co. posted a narrower-than-expected loss thanks to a 21% increase in revenues from a year ago. The tire maker fell 15 cents to 9.74 dollars.
Declining issues barely outnumbered advancers on the New York Stock Exchange, where volume was very light.
The Russell 2000 index of smaller companies was down 1.80, or 0.3%, at 568.74.