NEW YORK – Stocks fell Tuesday after the Federal Reserve raised the benchmark interest rate to its highest level since 2001 and gave no indication it's near the end of its rate-increase campaign.
The Dow Jones industrial average (search) was down 76.11 points, or 0.72 percent, to end at 10,481.52. The Standard & Poor's 500 index (search) was down 9.68 points, or 0.79 percent, to finish at 1,221.34. The technology-laced Nasdaq Composite Index (search) was down 13.93 points, or 0.65 percent, to close at 2,131.33.
"Stocks are clearly under pressure," said Tony Dwyer, chief equity strategist at FTN Financial. "You would expect the higher rates to negatively impact the consumer."
The Fed raised the fed funds rate for the 11th straight time since June 30, 2004, bringing it up a quarter-percentage point to 3.75 percent, and saying Hurricane Katrina will give the broad economy only a temporary setback.
Shares of companies sensitive to higher lending rates, such as homebuilders Centex Corp. (CTX) and D.R. Horton Inc. (DHI) , declined after the Fed's rate decision. Centex slid 2.4 percent to $64.95, while D.R. Horton fell 5.4 percent to $34.33. The Dow Jones index of homebuilders fell almost 5 percent, its biggest percentage drop since Oct. 4, 2004.
Shares of mortgage lenders, including government-sponsored Fannie Mae and Freddie Mac , also declined.
Fannie Mae (FNM) dropped 1.9 percent, or 88 cents, to $46.66, and Freddie Mac (FRE) fell 2.7 percent, or $1.59, to $57.50.
Wal-Mart Stores Inc. (WMT), the world's largest retailer and a Dow component, fell to near a five-year low after the Fed's comments. The stock closed at $43.21, down 1.8 percent, or 80 cents, after earlier hitting a session low of $43.10.
U.S. crude oil futures ended down Tuesday after gaining more than $4 on Monday. October crude futures , which expired at the close of Tuesday's regular NYMEX trading, fell $1.16 to settle at $66.23 per barrel.
Fed officials also said in their statement that higher energy costs have "potential to add to inflation pressures."
The session's few gainers included Qualcomm Inc. (QCOM), which climbed 1.7 percent to $43.42. Analysts at Goldman Sachs & Co. raised its rating on the wireless technology company's stock in anticipation of improving demand for high-speed wireless services.
Circuit City Stores Inc. (CC) also rose after the electronics retailer reported a surprise quarterly profit.. Shares gained 5.9 percent to $16.43.
Trading was heavy on the New York Stock Exchange, with about 1.73 billion shares changing hands, above last year's daily average of 1.46 billion, while on Nasdaq, about 1.88 billion shares were traded, above last year's daily average of 1.81 billion.
On the NYSE, declining shares outnumbered advancing stocks by a ratio of about 2 to 1. On Nasdaq, about three stocks fell for every two that rose.