NEW YORK – Stocks fell in choppy trading Wednesday as Wall Street, awaiting news from the Federal Reserve (search) about the state of the economy, shrugged off an increase in weekly U.S. oil inventory and an upward revision of U.S. gross domestic product growth.
The Dow Jones industrial average (search) ended down 31.15 points, or 0.30 percent, at 10,374.48. The Standard & Poor's 500 Index (search) was down 1.72 points, or 0.14 percent, at 1,199.85. The technology-laced Nasdaq Composite Index (search) dropped 1 point, or 0.05 percent, to 2,068.89.
"We're just waiting for news tomorrow," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "Traders are like kids in the back seat of the car saying, 'Are we there yet? Are we there yet?' The traders are saying, 'Is the report out? Is the report out?' "
The policy-setting Federal Open Market Committee's (search) two-day meeting began Wednesday afternoon. The Fed is expected to raise its benchmark funds rate by a quarter-percentage point to 3.25 percent, according to a Reuters poll.
"It is Fed watch time. We don't think it is going to surprise anyone," said Tim Ghriskey, chief investment officer of Solaris Asset Management. "The hope is that the Fed may say that they are almost done with the tightening."
Higher interest rates are typically bad for stocks since they increase the cost of borrowing money for consumers and corporations.
Crude settled down 94 cents at $57.26 on the New York Mercantile Exchange (search) on news of an unexpected rise in weekly U.S. oil inventories. Oil's retreat is a positive sign for stocks after crude's surge to a record $60.54 Monday drove the market lower on concerns that higher energy costs would crimp corporate profits.
"The market today is ignoring another decline in the price of crude oil. We know how volatile these crude prices are so there is always distrust in the short term moves of crude," Ghriskey of Solaris Asset Management said.
Earlier, the U.S. Commerce Department said gross domestic product grew at a 3.8 percent annual rate in the first quarter, up from its previous estimate of a 3.5 percent rise for the period.
"Regardless of the GDP numbers there is a real concern that the economy is going to slow in the second half of the year. If that is to be believed then cyclicals will not lead the market. Also, the Fed's move to increasing interest rates could drive the slow growth scenario," said Barry Hyman, equity market strategist at Ehrenkrantz, King, Nussbaum.
Industrial companies, which are benchmarks of the U.S. economy, fell with heavy-equipment maker Caterpillar (CAT) slipping 1.2 percent to $96.64 and diversified manufacturer 3M (MMM) dropping 1.4 percent to $76.04.
Oracle Corp. (ORCL) said its profit rose 3.2 percent in the fourth quarter, its best year-over-year profit and revenue gain since 2000. This was the first full quarter that included the PeopleSoft Inc. business, which it bought for $10.6 billion. The earnings far exceeded Wall Street's expectations and Oracle rose 74 cents, to $13.57.
Scandal-rocked insurance company American International Group Inc. (AIG), a Dow component, Tuesday reported a 44 percent rise in quarterly earnings. AIG shares rose 6 percent to $58.48 on the New York Stock Exchange.
Monsanto Co. (MON ), the maker of RoundUp herbicide and bioengineered seeds, said third-quarter earnings fell 81 percent from last year due to a $248 million write-off of research and development related to acquisitions. The St. Louis company also issued a full-year earnings outlook for fiscal 2005 that is below Wall Street's consensus. Monsanto fell 7.1 percent to $63.
The Food and Drug Administration plans to add information about possible psychiatric side effects — including suicidal thoughts and psychotic behavior — to the labels of Ritalin and Johnson & Johnson's Concerta. The FDA said it would also investigate other drugs used to treat attention deficit disorder, The Wall Street Journal reported. Johnson & Johnson (JNJ) fell 37 cents, to $65.70.
Advancers outnumbered decliners on both the New York Stock Exchange and the Nasdaq.
About 1.35 billion shares changed hands on the NYSE, below the 1.46 billion daily average for last year, while on Nasdaq, about 1.67 billion shares were traded -- below the 1.81 billion daily average last year.
The Russell 2000 index of smaller companies rose 1.28, or 0.20 percent, to 642.76.
Overseas, Japan's Nikkei stock average rose 0.55 percent. Britain's FTSE 100 was up 0.37 percent, Germany's DAX index was up 0.57 percent, and France's CAC-40 was up 0.90 percent.
Reuters and the Associated Press contributed to this report.