Stocks move little ahead of Fed decision

Stocks move little ahead of Fed decision

	Published : Wed, 21 Mar 2007 18:45 By : Agencies Print this Story

NEW YORK (AP) - Stocks fluctuated in tepid trading Wednesday as investors awaited the Federal Reserve's latest take on the economy, which could signal where interest rates are headed.

While Wall Street largely expects the Fed to leave short-term interest rates unchanged at 5.25 percent, investors are eager to learn whether the central bank will reveal a shift in its assessment of the economy. The Fed has remained vigilant about the threat of inflation, which it has said remains stubbornly high. However, a softening economy could quell the threat of inflation and, some investors are hoping, open the way for a rate cut.

The Fed left interest rates, the rate banks charge each other for overnight loans, unchanged at its last five meetings after a string of 17 straight increases that began in 2004.

'The markets are trading recently with uncertainty. They are looking for direction and they are looking toward the Fed meeting for that,' said Sean Simko, head of fixed income management at SEI Investments. 'There is a much more heightened focus on this statement with all the issues surrounding subprime mortgage lenders and volatility in the equity markets.'

In early afternoon trading, the Dow Jones industrial average fell 2.00, or 0.02 percent, to 12,286.10, after two sessions of gains.

Broader stock indicators showed modest gains. The Standard & Poor's 500 index rose 2.61, or 0.18 percent, to 1,413.55, and the Nasdaq composite index advanced 4.87, or 0.20 percent, to 2,413.08.

Bonds fell ahead of the Fed decision. The yield on the benchmark 10-year Treasury note rose to 4.57 percent from 4.55 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 17 cents to $59.42 after a government report showed U.S. crude oil inventories rose again last week. However, gasoline stocks fell faster than analysts expected, sending the price of gasoline higher.

Simko contends some investors will be looking for the Fed to adopt a more dovish tone on inflation and allay concerns that the economy is slowing faster than expected. However, despite the economic concerns that helped sparked the selloff three weeks ago that included a 416-point one-day drop in the Dow, he expects the Fed is likely to stand its ground.

'They have to remain data-dependent. If they take their inflation bias off they risk losing their credibility.'

While most of Wall Street's attention will remain squarely on the Fed, a few key earnings reports should also draw interest. Morgan Stanley's fiscal first-quarter earnings and revenue blew past Wall Street's estimates and FedEx Corp.'s fiscal third quarter earnings came in stronger than expected but the shipping company warned profits in the coming fiscal year could fall below its expectations.

Morgan Stanley rose $3.68, or 4.8 percent, to $79.79, while FedEx fell $1.87, or 1.7 percent, to $110.42.

Software companies showed gains. An acquisitive Oracle Corp. indicated its expansion plans might be reaping dividends as its fiscal third-quarter earnings and new software sales topped Wall Street's expectations. Oracle advanced 35 cents, or 2 percent, to $17.90.

Adobe Systems Inc. rose $2.03, or 5 percent, to $42.78 after the company reported its first-quarter results topped Wall Street's expectations and the company increased its profit forecast.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 669 million shares.

The Russell 2000 index of smaller companies rose 0.69, or 0.09 percent, to 794.29.

Overseas, markets in Japan were closed for a holiday. Hong Kong's Hang Seng index rose 0.82 percent and the sometimes volatile Shanghai Composite Index rose 0.83 percent to a new record. A nearly 9 percent drop in the Shanghai index on Feb. 27 helped kick off a global selloff that shaved more than 3 percent from the major U.S. stock indexes and reintroduced volatility to an unusually calm U.S. market. The drop in Shanghai came after the ascendent index, which rose 130 percent last year, had set a string of record closes.

Britain's FTSE 100 closed up 0.59 percent, Germany's DAX index added 0.18 percent, and France's CAC-40 slipped 0.02 percent.