Techs fall as market awaits Fed meeting

The Associated Press
Tuesday May 15, 2001

NEW YORK — Anxiety over interest rates made for a quiet Monday on Wall Street, with investors reluctant to make any big moves on the eve of an important Federal Reserve meeting. Blue chips rose moderately, while technology stocks drifted lower, giving the Nasdaq composite its fourth straight decline. 

Analysts said the market’s tentativeness resulted from doubts about how big a rate cut the Fed will make – if it makes one at all – on Tuesday. 

“It’s really been a non-event day,” said Stephen Carl, head of equity trading at The William Capital Group. “Everybody’s just on the sidelines waiting to see what the Fed does. The volume is so low that it’s hard to tell what, if anything, else is going on.” 

Trading activity was muted throughout the session, with the New York Stock Exchange and Nasdaq Stock Market experiencing their slowest day of the year. 

NYSE volume was 858.27 million shares, compared with 906.25 million Friday, the previous low this year. The Nasdaq recorded 1.30 billion shares trading hands, compared with its previous 2001 low of 1.43 billion recorded Friday. 

Although most analysts still expect the Fed to make its fifth interest rate cut of 2001 at its Tuesday meeting, there are doubts about whether the reduction will be as big as expected. 

The central bank has been lowering rates to stimulate the sluggish economy, but some recent data have indicated business may not be as weak as previously thought. If the economy shows signs of strength – as some better-than-expected retail and consumer sentiment reports suggested last week – many fear the Fed will be less inclined to cut aggressively. 

The problem for the market: In the absence of strong earnings, investors have become increasingly dependent on the Fed’s cuts for catalysts to rally stocks. Stocks spent most of last week in a narrow trading range in anticipation of the Fed’s next move. 

“Not having the 100 percent certainty that the Fed will lower interest rates as much as many want is what’s causing this,” said Steven Goldman, market strategist at Weeden & Co. “But overall, the market remains on good footing.” 

The latest Fed report released Monday showed further evidence that the economy slowed during the spring. Industrial production fell in April by a bigger-than-expected 0.3 percent, the seventh straight monthly decline, according to the report. 

Technology stocks were especially weak, reflecting the gradual selling since April’s big advance. Cisco Systems fell 48 cents to $18.57, while Intel dropped 53 cents to $27.41. 

Non-technology issues fared better, including banker J.P. Morgan, up $1.20 at $47.64. 

Also Monday, SunTrust Banks fell $4.81 to $60 on news it made a $14.7 billion bid for Wachovia, a move that could derail First Union’s planned $12.5 billion purchase of the North Carolina bank.  

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