Published January 14, 2015
Stocks ended almost unchanged Wednesday as investors digested comments from the Federal Reserve hinting of a December rate hike and technology shares were kept under pressure by lower-than-projected sales at Cisco Systems.
The Dow Jones industrial average (search) edged down 0.89 of a point, or 0.01 percent, to finish at 10,385.48. The Standard & Poor's 500 Index (search) declined 1.17 points, or 0.10 percent, to end at 1,162.91. The technology-laced Nasdaq Composite Index (search) dropped 8.77 points, or 0.43 percent, to close at 2,034.56.
In a widely expected move, the Federal Reserve (search ) Wednesday raised its target for the federal funds rate by a quarter percentage point to 2 percent from 1.75 percent.
The unanimous decision by Fed Chairman Alan Greenspan (search) and the rate-setting Federal Open Market Committee (search ) is part of a credit-tightening campaign to bring rates back up to more normal levels now that the economy's recovery from the 2001 recession is more deeply rooted.
"The Fed did exactly what people expected," said Larry Wachtel, senior vice president and market analyst at Wachovia Securities LLC.
"So after the Fed made the announcement, there was a brief flurry and then we started down again," Wachtel said. "The Fed implied that it would tighten again in December if conditions warranted. So if anyone was waiting for higher drama at 2:15 p.m., they didn't get it. So then (the market) drifted lower, with no particular impetus to do anything."
Analysts said the chance of another rise in interest rates in December was now greater.
"What I think the Fed statement said is that inflation is not a risk, we have pretty strong economic growth, and we're going to stay the course," said Jonathan Golub, U.S. equity strategist at JP Morgan Fleming Asset Management.
"This increases the likelihood of the December rate increase."
A hike in crude oil prices took some wind out of the stock market's sails and curbed gains. NYMEX crude for December delivery settled at $48.86 a barrel, up $1.49, after government data showed distillate stockpiles, which include heating oil, dropped for the eighth week in a row ahead of winter.
Higher oil prices generally dampen stock prices because they tend to curb corporate profits and consumer spending.
But positive news came from the U.S. government, which lowered the terror threat level for the financial services sector in New York City, northern New Jersey and Washington, D.C., according to an administration official.
On the economic front, the number of Americans filing initial claims for jobless pay rose last week to 333,000, the Labor Department (search) said, but was still lower than expected by Wall Street.
Another government report showed that the monthly U.S. trade deficit totaled $51.6 billion, down from a revised $53.5 billion in August.
Cisco Systems Inc. (CSCO) shed $1.31, or 6.6 percent, to $18.44, after issuing results that met profit expectations, but missed sales forecasts. Growth at the world's leading maker of routers and switches that move data over computer networks remains strong despite cautious spending by its corporate customers, but management warned that it could face increased competition, particularly from Asia-based rivals.
Intel Corp. (INTC) was down 22 cents at $22.86 after the chipmaker doubled its quarterly dividend to 8 cents per share and said it would buy back 500 million shares of common stock, expanding an ongoing share repurchase program. Companies often buy back stock when they're trying to boost share prices.
U.S. computer makers Dell Inc. (DELL) and Hewlett-Packard Co. (HPQ) fell after UBS investment bank cut its rating on their shares to "neutral" from "buy," dealers said Wednesday. Dell slipped 58 cents, or 1.6 percent, to $36.85, while Hewlett-Packard fell 73 cents to $18.97, a drop of almost 4 percent.
Meanwhile, drugmaker Merck & Co. Inc. (MRK) helped prop up the Dow, rising 1.6 percent, or 41 cents, to $26.41 after Japan's Ono Pharmaceuticals Co. Ltd. gave Merck rights to develop and market an acute stroke drug worldwide except for Japan, South Korea and Taiwan.
Meanwhile, shares of drugmaker Pfizer Inc. (PFE) slipped 1.5 percent to $27.57 after a New York Times article reported results from a study that showed the incidence of heart attacks and strokes among patients given Pfizer's painkiller, Bextra, was more than double that of those given placebos.
Federated Department Stores Inc. (FD) was up 5 cents at $53.85 as a rise in fiscal third-quarter earnings topped analysts' expectations, thanks to improved performance in October. The operator of Macy's and Bloomingdale's department stores beat per-share estimates by 3 cents.
Trading was active, with 1.5 billion shares changing hands on the New York Stock Exchange, above the 1.4 billion daily average for last year. About 1.85 billion shares were traded on Nasdaq, above the 1.69 billion daily average last year.
Advancers outnumbered decliners on the NYSE by a ratio of about 10 to 7, and by 8 to 7 on Nasdaq.
The lackluster close marked a further pause following last week's post-election rally.
The Russell 2000 index, which tracks smaller company stocks, was up 2.97, or 0.49 percent, at 609.61.
Overseas, Japan's Nikkei stock average rose 0.27 percent. In Europe, France's CAC-40 was up 0.40 percent, Britain's FTSE 100 added 0.36 percent and Germany's DAX index gained 0.59 percent.
Reuters and the Associated Press contributed to this report.