Profit-taking weighs on Wall Street

/ Source: The Associated Press

Stocks fell Wednesday after three days of gains as investors dealt with the likelihood of interest rates rising significantly higher than expected when the Federal Reserve meets later this month.

Oil prices seem to be stabilizing after reaching 21-year highs in recent weeks, but inflation worries linger. Some investors may have been taking a cautious approach ahead of the Labor Department’s monthly report on wholesale prices, an important inflation gauge.

The Producer Price Index, which measures prices of goods before they hit store shelves, was to have been released Thursday, a day earlier than scheduled, because U.S. government offices and most financial markets will be closed Friday in observance of former President Reagan’s death.

However, government officials announced late Wednesday the PPI report for May would be postponed until further notice because of difficulties in calculating the measure. A revised release date was not set, but could be no earlier than Tuesday, officials said.

With so much uncertainty, it seemed many investors were inclined to stay on the sidelines, and volume was low. Such a day “can’t be used as any indication of a trend,” said Neil Massa, an equity trader with John Hancock.

“It just seems like the start of the summer doldrums,” Massa said. “I think once the end of the month comes, we can start to move forward. Until then we’ll be trading sideways. ... I don’t see any other catalyst to push us forward.”

The Dow Jones industrial average declined 64.08, or 0.6 percent, to 10,368.44.

The broader gauges were also lower. The Nasdaq composite index fell 32.92, or 1.6 percent, to 1,990.61. The Standard & Poor’s 500 index was down 10.89, or 1 percent, at 1,131.29.

The slide came a day after Federal Reserve Chairman Alan Greenspan said the central bank was prepared to do whatever was necessary to ensure sustainable economic growth in the face of rising inflation and energy prices. The unusually direct statement led some on Wall Street to believe the Fed would raise rates as high as half a percentage point at its June 29-30 meeting, higher than the 0.25 percent the market has been expecting.

“Equities kind of shrugged it off yesterday; today it seems like folks are saying, ’Is inflation an issue? How far will the Fed have to go? How long will this tightening last?”’ said John Caldwell, chief investment strategist for McDonald Financial Group. “Higher rates certainly will have an impact. That will be a juggling act for the stock market over the next six months.”

Oil prices remained in the spotlight Wednesday, as U.S. inventory data showed a rise in crude and refined fuel product stores last week. The news had little impact on the market, however. Crude futures, which have fallen in four of the last five sessions, settled higher on the New York Mercantile Exchange, up 26 cents at $37.54 a barrel.

Dow component Coca-Cola Co. was down 85 cents at $51.76 after No. 2 executive Steve Heyer announced plans to step down after he was passed over for the top job at the world’s biggest beverage maker. Heyer, the company’s president and chief operating officer, will leave after a transition period of several months.

Fortune Brands Inc. fell 41 cents to $74.20 after the maker of products including Jim Beam bourbon, Titleist golf equipment and Moen faucets raised its forecast for the current quarter to the top range of analysts’ expectations.

Smithfield Foods Inc. was down $1.16 at $29.05 after the nation’s largest hog producer and pork processor reported sharply higher quarterly earnings, largely due to expanded operations and rising prices.

Decliners outnumbered advancing shares more than 3 to 1 on the New York Stock Exchange. Volume came to 1.27 billion shares, compared with 1.19 billion shares traded Tuesday.

The Russell 2000 index, which tracks smaller company stocks, was down 9.33, or 1.6 percent, at 568.58.

Overseas, Japan’s Nikkei stock average finished 0.6 percent lower Wednesday. In Europe, France’s CAC-40 closed down 0.7 percent, Britain’s FTSE 100 shed 0.3 percent and Germany’s DAX index fell 0.5 percent.