Monday May 14 12:45 PM ET
Stocks Fall, Focus on Fed Rate Meeting
By Chelsea Emery
NEW YORK (Reuters) - Technology stocks stumbled in mid-day trading on Monday as Wall Street worried that some areas of the economy have recovered to the point where the U.S. Federal Reserve (news - web sites) will dish out a smaller-than-hoped for interest-rate cut at its policy-setting meeting on Tuesday.
The broader market was little changed, marking time until the Fed's meeting on Tuesday. The outcome of the meeting was thrown into doubt by economic reports on Friday that showed consumer sentiment has rebounded and retail sales rose.
``After strength in the economic numbers last week, I'm not sure 50 basis points is a foregone conclusion anymore,'' said Tom Schrader, head of listed trading at Legg Mason Wood Walker Inc. in Baltimore. ``Anything less is really going to throw the market for a loop.''
The Nasdaq Composite Index fell for the fourth straight session, loosing 31.06 points, or 1.47 percent, at 2,076.37 as investors took advantage of recent gains to pare some holdings. The composite is still 26.6 percent above its low set on April 4, even after last week's 3.9 percent decline.
Stocks slumped on Friday after the economic numbers cast doubt on the Fed's aggressive campaign of cutting rates to spark growth. The Fed has hacked 2 percentage points off the federal funds rate so far this year, and the market hopes for a fifth half percentage point trimming to prompt consumer spending and boost corporate profits.
One dealer in a survey of 25 banks and investment firms that trade directly with the Fed taken by Reuters on Friday thought the central bank would reduce the rate by 25 basis points. While the remaining dealers forecast a 50 basis-point cut, portfolio managers fretted stocks would decline either way.
``Stocks in all likelihood are going to go down tomorrow because 50 basis points are already expected and 25 aren't enough,'' said Michael Ranis, who oversees $500 million at Bank Hapoalim in New York. ``If you feel the market is going down tomorrow, you might as well sell today. |
