Dow Drifts Lower Amid Fed Watch
NEW YORK – Blue-chip stocks sank Monday as investors headed to the sidelines, hoping the Federal Reserve meeting, which starts Tuesday, will generate another interest-rate cut to pump up the nation's sluggish economy.
Technology shares managed to eke out modest gains in very light trading volume.
``The closer we get to completing the earnings preannouncement period the more likely it is that there will be a base in some of these technology stocks for at least another quarter,'' said Rick Meckler, a senior managing director at Liberty Asset Management, which oversees $1 billion.
The blue-chip Dow Jones industrial average fell 100.37 points, or 0.95 percent, to end at 10,504.55. Retailer Home Depot was a big drag on the blue-chip index, as its shares were hurt by a bearish article in the financial weekly Barron's.
The technology-loaded Nasdaq composite index rose 16.07 points to 2,050.91. Cisco Systems Inc., the world's largest maker of gear that powers the Internet, helped boost Nasdaq with a 99-cent gain at $18.51.
Trading was subdued on the Nasdaq, with 1.5 billion shares changing hands -- well below the average 2.1 billion in May.
The broader Standard & Poor's 500 Index fell 6.74 points to 1,218.61.
Investors, swamped by profit warnings, are looking to the Fed for relief. The central bank is expected to cut interest rates by least a quarter-percentage point at its Tuesday-Wednesday policy meeting, but many are hoping for a half-percentage point cut to resuscitate the economy.
A growing number of the 25 primary dealers of U.S. government securities see the central bank slashing rates by a half-point. Ten now expect a 50-basis-point cut at the meeting, up from six at the middle of June, while the remaining 15 dealers forecast a 25-basis-point cut.
``What the market wants is tangible proof that the liquidity the Fed has pumped into the economy is starting to be reflected in earnings reports,'' said Paul Cherney, an analyst at S&P Marketscope.
Home Depot fell $1.71 to $49.00 and was the Dow's biggest loser on a percentage basis after Barron's said the No. 1 home improvement retailer's stock was overvalued.
Coca-Cola Co., however, offered the Dow support after Goldman Sachs added the world's largest soft-drink maker to its recommended for purchase list, saying ``sentiment has become decidedly too negative toward the stock.'' Coke rose 74 cents to $43.59
Honeywell International Inc. fell $1 to $35.60, while fellow Dow component General Electric Co. fell $1.61 to $50.25. A European Union advisory committee backed commission experts on Monday and opposed GE's purchase of Honeywell on a split vote.
International Business Machines Corp., the world's largest computer maker, slipped 49 cents to $112.38. The Dow component said it built the world's fastest silicon transistor, a breakthrough it said would yield microchips within two years that run five times faster than current models.
Compaq Computer Corp. rose 40 cents to $13.90. The computer giant said it plans to phase out its own line of computer chips in favor of microprocessors made by top chip maker Intel Corp. as well as deepen cost cuts to speed its shift from a hardware company to a business services company.
Intel, a Dow component and Nasdaq heavyweight, rose $1.07 cents to $28.58.
Biotechnology stocks were suffering as Biogen Inc. took a hit from downgrades by brokerage firms Lehman Bros. and Merrill Lynch. Lehman cited uncertainties related to the patent on a new psoriasis medicine. Merrill said two of Biogen's leading drugs will not provide as much boost to earnings as hoped.
Biogen sank $5.46 to $54.41, and the Nasdaq biotechnology index fell 2.8 percent.
Amid slowing economic growth and a troubled stock market, investor sentiment has slumped to a four-year low, according to a monthly survey by UBS PaineWebber Inc. and the Gallup Organization. The Index of Investor Optimism fell to 104 in June from 113 in the prior month.
Declining issues outnumbered advancers by 3 to 2 on the New York Stock Exchange. Volume came to 1.03 billion shares, compared with 1.18 billion at the same point Friday.
The Russell 2000 index fell 4.46 to 484.19.
Overseas, Japan's Nikkei stock average fell 1.1 percent. Germany's DAX index slid 0.7 percent, Britain's FT-SE 100 dropped nearly 0.1 percent, and France's CAC-40 gained 0.6 percent.
-- The Associated Press and Reuters contributed to this report.