Wall Street finished Tuesday’s rather uninspiring session narrowly mixed, as investors continued to consolidate a two-week run of gains for the broader market and waited cautiously for Wednesday’s decision on U.S. interest rates.
Caution ahead of a quarterly update from high-tech bellwether Cisco Systems, released after the close of trading, and more troubling developments in the scandals at insurance broker Marsh & McLennan and drug maker Merck also kept Wall Street in an apprehensive mood.
The Dow Jones industrial average moved in and out of positive ground for the whole session and by the close was down 4.94 points, or 0.1 percent, while the broader Standard & Poor’s 500-stock index was off a fraction of a point. The technology-rich Nasdaq composite index added 4.08 points, or 0.2 percent.
The Federal Reserve’s policy-setting committee is widely expected to announce another increase in short-term interest rates after its scheduled meeting Wednesday, but questions remain over what assessment the central bank might make of current economic conditions.
Robert Christian, chief investment officer at Wilmington Trust, said the stock market had already factored in a rate increase, but is 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.
Seasoned Fed watcher Paul McCulley, a portfolio manager at bond research and management firm PIMCO, told CNBC that the Fed is likely to signal to the market that further rate hikes are contingent upon more evidence of consistent job creation. The Fed will indicate “it’s not going to be a forced march,” he said, echoing recent comments by Fed Vice Chairman Roger Ferguson.
The re-election of President George W. Bush on Wednesday last week, Friday’s better-than-expected employment report for October and a continued drop in crude oil prices from record highs has fueled a broad stock market rally over the last two weeks, but the market consolidated those gains Monday.
Prior to Monday the broader market, as measured by the S&P 500 index, had posted gains in nine straight trading sessions and closed Friday at its highest level in two and a half years.
A concern to investors Tuesday was a drop in the shares of Dow component Merck, which fell 2.2 percent to $26 after the drug maker said it has received a subpoena from the U.S. Department of Justice concerning its blockbuster arthritis medication Vioxx, which it pulled off the market after studies showed it increased the risk of heart attacks. The Securities and Exchange Commission has started an informal inquiry into the matter.
Marsh & McLennan, the world’s number-one insurance broker, announced early Tuesday it would cut 3,000 jobs, or about 5 percent of its work force, as the company grapples with charges of insurance bid-rigging by New York Attorney General Eliot Spitzer.
Marsh also reported earnings that were well below Wall Street’s estimates and 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. Its share price fell 2.1 percent to $26.80.
After Tuesday’s close Cisco Systems, the biggest maker of equipment that directs data over the Internet, said its quarterly earnings were boosted by rising demand for its networking gear. Its share price closed the regular trading session down 1.1 percent at $19.75.
The Wall Street Journal reported that a criminal probe of aerospace giant Boeing's dealings with the U.S. Air Force is widening to include a $100 billion Army program it oversees. The newspaper, citing people familiar with the matter, said the investigation is preliminary and prosecutors have not yet alleged any improprieties. Boeing’s stock price rose 1.2 percent to $52.51.
Wall Street also digested a late wave of corporate earnings news as the third-quarter reporting season entered its final stages.
Long Island-based cable TV provider Cablevision Systems reported a much narrower third-quarter loss than Wall Street had been expecting. And satellite TV broadcaster EchoStar Communications said 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.
U.S. crude oil futures prices dipped below $48 a barrel as growing signs of ample supply eased concerns over fuel stocks for the northern winter. But analysts said the market fundamentals were pointing to higher prices in the coming weeks. Crude for December delivery eventually settled at $47.37, down $1.72 on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei average fell 0.2 percent. In Europe, Britain’s FTSE 100 was up 0.02 percent, while Germany’s DAX was off 0.1 percent and France’s CAC-40 index fell 0.2 percent.