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Wall Street ends lower after latest rate hike

Stocks finished Tuesday slightly lower after the Federal Reserve raised interest rates as expected, exacerbating traders’ ill humor following a disappointing profit forecast from Dell Inc.
/ Source: The Associated Press

Stocks finished Tuesday slightly lower after the Federal Reserve raised interest rates as expected, exacerbating traders’ ill humor following a disappointing profit forecast from Dell Inc.

The Fed’s quarter percentage point hike in the nation’s benchmark interest rate, pushing it to 4 percent, was widely anticipated. The Fed also signaled it would continue gradually raising rates, but noted that inflation has had relatively little effect on the economy in recent months.

Stocks may be falling because of sentiment on the Street that the hikes are unwarranted. This increase and the one or two expected to follow may simply serve to give Ben Bernanke, who has been nominated as the next Federal Reserve chairman, wiggle room to cut rates as a stimulus next year, said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati.

The most recent sign of a slowing economy came from PC maker Dell, which trimmed its sales and income targets for the current quarter after the close of regular trading Monday, saying sales in the United States and Britain were weak. The company also said it would take a third-quarter charge of $450 million to restructure its consumer unit and replace some faulty PC circuits. Dell fell $2.64 to $29.24.

The Dow Jones industrial average finished the day down 33.30 points, or 0.3 percent, while the broader Standard & Poor’s 500-stock index fell 4.25 points, or 0.4 percent. The Nasdaq composite index, full of tech stocks, gave up 6.25 points, or 0.3 percent.

The nation’s manufacturing activity grew at a slower pace during October as companies increasingly felt the strain of a continuing rise in energy and raw materials prices, the Institute for Supply Management said. The ISM’s measure of costs, its prices index, rose to 84.0 in October from a reading of 78.0.

More broadly, concerns about inflation, natural disasters, housing prices and energy prices continue to hang over the market, said Aaron Gurwitz, a senior strategist at Lehman Brothers private investment management group.

“The problem is that we see these concerns as not getting better; they’re sort of staying the same as they are or getting worse.”

Bob Sitko, assistant vice president, USAA Private Investment Management, agreed. “Looking into next year, we have more worry than optimism. We’re positioning more cautiously than aggressively.”

In other company news, Procter & Gamble Co., maker of Pampers, Pringles, Tide and other consumer products, fell 74 cents to $55.25 after it said fiscal first-quarter net income grew a better-than-expected 4 percent, helped by strong revenue growth and despite the effects of hurricanes and rising energy and commodity costs.

McDonald’s Corp. rose 17 cents to $31.77 after Vornado Realty Trust said in its quarterly filing with the Securities and Exchange Commission it owns about 1.2 percent of McDonald’s outstanding shares. Rumors have circulated since this summer that the real estate company might buy a stake in the fast-food company for its property. Vornado fell $1.31 to $79.69.

Marsh & McLennan Companies Inc., the nation’s largest insurance brokerage, said its profits rose in the third quarter despite a drop in revenue. Still, its earnings missed analysts’ expectations and the stock fell 65 cents to $28.50.

Viacom Inc., the media conglomerate that owns MTV, CBS and the Paramount movie studio, swung to a profit of $708.5 million in the third quarter, bouncing back from a loss in the year-ago period when results were hit by a charge for the Blockbuster Inc. video rental business. Its stock rose 56 cents to $31.61.

Overseas, Japan’s Nikkei stock average rose 1.92 percent, its highest close in 4 1/2 years on falling oil prices, overnight gains on Wall Street and hopes for structural reform. Trading was suspended for all but the final 90 minutes of the day due to a computer glitch in the Tokyo Stock Exchange’s transactions system.

Britain’s FTSE 100 rose 0.51 percent, Germany’s DAX index lost 0.13 percent, and France’s CAC-40 fell 0.04 percent.