US stocks end lower as investors assess rate cut

Wall Street finished lower today as further signs of economic deterioration offset earlier enthusiasm about the Federal Reserve’s record interest rate cut.

Stocks fell in the early going after Morgan Stanley reported a larger-than-expected quarterly loss – a fresh reminder of the obstacles the battered financial industry still faces.

After briefly moving into positive territory, stocks fluctuated in late afternoon trading as investors grappled with concerns about the economy, including more layoffs, the threat of deflation and the magnitude of the Fed’s actions.

The Dow Jones industrial average had gained more than 4% yesterday after the central bank lowered its federal funds rate target to a range of zero to 0.25%.

The Dow is down about 100 points to the 8,823 level.

Morgan Stanley posted a loss of $2.37bn, or $2.34 per share, for the fiscal fourth quarter. The report came a day after rival Goldman Sachs Group Inc. posted its first quarterly loss since going public in 1999.

“This is a whole lot of new information for people to digest,” said David Waddell, senior investment strategist and chief executive of Waddell & Associates. “Now we need time to sit back ... and figure out what it all means.”

Some investors also took the Fed’s sharp rate cut as an indication of how dire the global financial crisis and economic troubles really are.

The Fed’s move was an unprecedented one aimed at boosting borrowing and lending. The central bank said it anticipates the weak economy will keep the target rate low for “some time”.

Still, despite today’s decline, investors have been resilient in recent trading sessions, an encouraging sign for analysts who believe the market might be entering a period of stability after the unrelenting selling of the past three months.

“Even if the market is down 100 points, the fact that it’s been in a narrow trading range I think is very positive,” Waddell said.

According to preliminary calculations, the Dow Jones industrial average fell 99.80, or 1.21%, to 8,824.34, after falling as many as 146 points earlier in the session. The Standard & Poor’s 500 index slipped 8.76, or 0.96%, to 904.42, and the Nasdaq composite index fell 10.58, or 0.67%, to 1,579.31.