Fed Minutes Help Stocks Minimize Losses
Tuesday April 12, 2:31 pm ET
By Michael J. Martinez, AP Business Writer
Stocks Minimize Losses As Fed Minutes Show Willingness to Stick With 'Measured' Rate Hikes
NEW YORK (AP) -- Stocks regained some of their losses Tuesday after the minutes of the Federal Reserve's last meeting showed that the monetary policy makers were willing to stick with "measured" interest rate hikes, at least in the short term.
While the possibility of higher and more aggressive interest rate hikes remains a concern, investors were relieved to see that the Fed's Open Market Committee, which met March 22, was willing to keep interest rate hikes minimal even as signs of inflation in the economy increased.
The Fed hiked the nation's benchmark rate by a quarter percentage point to 2.75 percent, the seventh such increase since last summer. In keeping to their consistent pattern, Fed policy makers noted that the nation's productivity remained strong and would help keep inflation in check.
In midafternoon trading, the Dow Jones industrial average was down 10.49, or 0.1 percent, at 10,438.07. The Dow had fallen more than 87 points earlier in the session, reaching its intraday lows for the year before the Fed minutes were released.
Broader stock indicators also showed improvement from earlier sharp losses. The Standard & Poor's 500 index was down 1.10, or 0.1 percent, at 1,180.11, while the Nasdaq composite index lost 4.52, or 0.2 percent, to 1,987.60.
Oil prices dropped as investors anticipated higher interest rates, which would bolster the dollar. A barrel of light crude was quoted at $52.75, down 96 cents, on the New York Mercantile Exchange. Bonds rose after the Fed minutes were released, with the yield on the 10-year Treasury falling to 4.40 percent, down from 4.44 percent late Monday. The dollar made gains against other major currencies, while gold prices fell.
Stocks fell early in the session after the Commerce Department said the nation's trade deficit hit an all-time high of $61 billion in February, a 4.3 percent increase over January that was far more than economists had expected. While U.S. exports rose by just $50 million, imports soared by $2.58 billion.
With the dollar still relatively weak, the trade deficit news heightened fears that inflation could take hold if foreigners abandon U.S. investments and U.S. consumers have to spend more on imported goods. It also increased fears that the Federal Reserve would have to raise interest rates aggressively to shore up the dollar.
"Obviously, the trade deficit isn't very good news at all," said Jack Ablin, chief investment officer at Harris Private Bank. "Some of this is certainly due to higher oil prices, and there are all kinds of inflation worries inherent in this."
In company news, American International Group Inc. climbed $1 to $53.10 after analysts at Merrill Lynch reiterated a "buy" rating on the Dow component's stock. The move came as former Chairman Maurice "Hank" Greenberg met with regulators' to answer questions about the company's business practices. A source who spoke on condition of anonymity said Greenberg invoked his Fifth Amendment rights and refused to answer.
Verizon Communications Inc. plans the sale of 132 million additional common shares to raise nearly $8.2 billion, which would more than cover the costs of acquiring MCI Inc. Verizon added 21 cents to $35.11, while MCI was up 10 cents at $26.11.
Abbott Laboratories Inc. said profits rose 1.8 percent from a year ago, and the drug maker's earnings were in line with Wall Street's forecasts. The company also reiterated its profit estimates for the rest of the year. Abbott edged 4 cents higher to $47.79.
Genentech Inc. rose 28 cents to $56.88 as the company reported a 61 percent hike in profits on the strength of its cancer drug sales. The biotechnology company beat Wall Street estimates by 4 cents per share, helped in part by sales of Avastin, a colon cancer treatment that has shown promise in battling other types of cancer.
Online broker Ameritrade Holding Corp. said its quarterly profits fell 12 percent as the number of customer transactions fell sharply. While Ameritrade still surpassed Wall Street profit forecasts by a penny per share, the company also saw a very high customer attrition rate. Ameritrade climbed 25 cents to $10.95.
The Russell 2000 index of smaller companies was down 1.16, or 0.2 percent, at 606.01.
Decliners outnumbered advancing issues by more than 3 to 1 on the New York Stock Exchange. Volume came to 835.49 million shares, compared to 768.52 million shares traded at the same point Monday
Overseas, Japan's Nikkei stock average fell 0.64 percent. In Europe, Britain's FTSE 100 closed down 0.54 percent, France's CAC-40 dropped 0.51 percent for the session, and Germany's DAX index lost 0.55 percent in late trading. |
