NEW YORK – Stocks ended narrowly mixed Tuesday as investors waited for hints from the Federal Reserve about the pace of interest-rate increases Wednesday while they digested troubling developments at insurance broker Marsh & McLennan and drugmaker Merck. A sharp drop in oil prices helped limit losses.
The Dow Jones industrial average (search) closed down 4.94 points, or 0.05 percent, at 10,386.37. The Standard & Poor's 500 Index (search) ended down just 0.81 of a point, or 0.07 percent, at 1,164.08. But the technology-laced Nasdaq Composite Index (search) rose 4.08 points, or 0.20 percent, to end at 2,043.33, edging up to a fresh four-month high.
Tuesday's performance marked the second session when markets have paused following last week's post-election rally. However, dealers said it was encouraging there had been no sell-off.
"Everyone's waiting for the Fed even though it's a foregone conclusion what they're going to do," said Tom Schrader, managing director, U.S. equity trading, Legg Mason Wood Walker.
"It's pretty quiet. The volume isn't bad, but there doesn't seem to be a lot of activity."
While the Fed's policy committee is expected to boost the benchmark fed funds rate by a quarter point to 2 percent at Wednesday's meeting as another pre-emptive strike against inflation, questions remain over what signals the central bank might issue on the overall economy in its policy statement.
Robert Christian, chief investment officer at Wilmington Trust Co., said the market had already factored in a rate increase but was anxious about what the Fed might say about the economy, including the inflationary impact of the dollar's recent decline. A weaker dollar makes imports more expensive.
"The issue is going to be the rhetoric they use around the rate increase," Christian said. Some investors, he said, are worried that the dollar's fall might prompt the Fed to move more aggressively than it would otherwise. Higher rates would make U.S. investments more attractive, helping boost demand for the dollar versus other currencies.
The market's unease was tempered by a strong drop in crude oil futures, which continued their abrupt downward trend of recent weeks. A barrel of light crude settled at $47.37, down $1.72, on the New York Mercantile Exchange (search).
The fall in oil prices helped economically sensitive stocks such as industrials, but hurt energy-related stocks. Heavy-equipment maker Caterpillar Inc. (CAT) rose $1.30, or 1.5 percent, to $88.31, but oil company Exxon Mobil Corp. (XOM) slipped 59 cents, or 1.2 percent, to $49.31.
Microsoft Corp. (MSFT) gained, helping both the Dow and the Nasdaq. The stock rose 1.7 percent, or 49 cents, to $29.77.
Marsh & McLennan (MMC) was down 56 cents at $26.80 after the company posted disappointing quarterly results and said it would cut 3,000 jobs, or about 5 percent of its work force, amid the continuing fallout over charges of insurance bid-rigging by New York Attorney General Eliot Spitzer.
Marsh also said it had reached a tentative $40 million settlement with the Securities and Exchange Commission over questionable brokerage allocation practices at its asset management firm, Putnam.
Merck (MRK) was down 57 cents at $26 as the Dow's biggest decliner after disclosing late Monday that the Securities and Exchange Commission and the Justice Department were examining the company's handling of Vioxx. Merck recently pulled the leading arthritis drug off the market after studies showed it increased the risk of heart attacks.
Cisco Systems Inc. (CSCO) was down 22 cents at $19.75 in anxious trading before the technology bellwether's quarterly profit report, which came in after the close. The networking giant saw its profits rise 27 percent for the quarter, and its earnings of 21 cents per share were in line with analysts' forecasts. Cisco shed another 46 cents to $19.29 in after-hours trading.
The market was also digesting a late wave of corporate earnings as the third-quarter reporting season entered its final stages.
The market also was digesting other earnings news as the third-quarter reporting season entered its final stages.
Satellite TV broadcaster EchoStar Communications Corp. (DISH) was up 69 cents at $30.71 after reporting that its earnings nearly tripled as the company added about 350,000 new subscribers. EchoStar also said it would pay a one-time dividend of $1 a share, or a total of $455 million, next month.
Cablevision Systems Corp. (CMCSA) was up 46 cents at $20.49 after the Long Island, N.Y.-based cable TV provider reported a much narrower third-quarter loss than Wall Street had been expecting.
Trading was fairly active, with 1.45 billion shares changing hands on the New York Stock Exchange, just above the 1.4 billion daily average for last year. About 1.69 billion shares were traded on Nasdaq, the same as the daily average last year.
Advancers outnumbered decliners on the NYSE and Nasdaq by a ratio of about 3 to 2.
The Russell 2000 index, which measures smaller company performance, was up 4.56, or 0.76 percent, at 606.64.
Overseas, Japan's Nikkei stock average fell 0.2 percent, Britain's FTSE 100 rose 0.02 percent, Germany's DAX index fell 0.09 percent, and France's CAC-40 fell 0.19 percent.
Reuters and the Associated Press contributed to this report.