U.S. stocks ended Tuesday's session mixed after the Federal Reserve lowered two key interest rates.
The Dow Jones industrial average declined 24.97 points, or 0.3 percent, to 8,986.28.
The Dow, which on Monday pushed back above 9,000 for the first time since late July, would have essentially broken even on the day if not for Hewlett-Packard, which fell the equivalent of 24 Dow points. Hewlett-Packard is a component of the Dow.
After Monday's close, the computer and printer maker posted a quarterly profit that topped Wall Street's deflated forecasts, but warned anew of the continuing impact of economic weakness in Asia and Latin America.
The Fed's Federal Open Market Committee trimmed the federal funds rate, its key monetary policy lever, to 4.75 percent from 5 percent. The move follows similar cuts taken on Sept. 29 and Oct. 15. The funds rate is the rate that banks charge each other for overnight loans.The FOMC also lowered the discount rate to 4.50 percent from 4.75 percent. The discount rate is what banks pay to borrow funds from the Fed itself.
The central bank said: "Although conditions in financial markets have settled down materially since mid-October, unusual strains remain." The FOMC next meets Dec. 22.
"By characterizing the settling down in the markets as 'material,' the Fed is implying that they feel the process of stabilizing the markets is mostly done, albeit incomplete ('unusual strains remain')," said Tony Crescenzi, chief bond market strategist at Miller, Tabak, Hirsch & Co. "
In the bond market, the initial knee-jerk reaction to the news was a healthy rally but gains were promptly reversed as buying cooled off and issues fell into negative terrain.
The 30-year Treasury declined 10/32, to yield 5.293 percent.
"I'm not sure the cut was really necessary or practical," said Roy M. Blumberg, portfolio manager at First Allied Securities. "In my mind, the Fed is losing a little ammunition here, because if we do have a problem with the market or economy later on it won't be as easy to takanother [rate] easing.
"We're in a marketplace where they're forcing the bears to become bulls," Blumberg continued. "Those that want to be bulls are having a hard time joining in because they're hoping they're going to get some kind of pullback to do it. And they're not getting that.
"Luckily, I wasn't part of that bear camp, so I don't have that concern."
Speaking at a conference of security analysts in Denver, Prudential Securities Director of Technical Research Ralph Acampora said he looks for the Dow Industrials to surpass 10,000 in 1999.
The banking, brokerage, and Internet sectors quickly scored the best gains following the Fed's announcement.
In Tuesday's market indicators:
- The Standard & Poor's 500 Index rose 0.3 percent.
- New York Stock Exchange losers led winners by 14 issues.
- On the Big Board floor, turnover expanded 4 percent to 702 million shares.
- The Nasdaq Composite advanced 0.9 percent. Declining issues led gainers by 22 to 17 in the Nasdaq Stock Market. Volume totaled 822 million shares.
- The Russell 2000 Index of small-company stocks sank 0.3 percent.
Among the companies in the news:
- Applied Materials added 1 1/16 to 37 3/8. After the close of Tuesday's trading, Applied reported a fiscal fourth-quarter operating profit of 7 cents a share, besting most estimates by a nickel. A year ago, it earned 49 cents. The bellwether maker of semiconductor equipment said its outlook for business conditions is "uncertain."
- Hewlett-Packard (HWP) declined 6 to 60 1/8. After the close of Monday's trade, it said fiscal fourth-quarter operating net amounted to 79 cents a share, besting Wall Street estimates by a nickel. That was above the 75 cents earned in the year-earlier period. The stock weakened, however, as the market didn't like the paltry 4 percent revenue growth. HP said it was adversely impacted by falling PC prices. It sees things improving in Europe, but isn't so ebullient on Japan.
- A host of retailers posted quarterly results. J.C. Penney (JCP) fell 1 7/16 to 50 3/16. The department store operator netted 68 cents a share in the third quarter vs. 85 cents in the third period of 1997. That was a penny richer than most estimates. Sales at stores open a year or more fell 4 percent.
- Home Depot (HD) ascended 5/8 to 48. The home improvement products retailer bested Street forecasts by a penny after reporting third-quarter profits of 26 cents a share, a dime more than a year ago. Sales at outlets open at least a year grew 7 percent.
- Dayton Hudson (DH) fell 2 to 43. It met most analysts' expectations with its third-quarter earnings of 39 cents a share. The discount retailer said it's "well positioned" for the holiday shopping season.
- Limited (LTD) dipped 1 1/16 to 27 1/8 after the women's apparel retailer matched Street projections with its third-quarter operating results of 17 cent a share. A year ago, it earned 17 cents. Revenues at locations open a year or longer rose 5 percent in the quarter.
- AnnTaylor Stores (ANN) slid past consensus views by 9 cents when it reported third-quarter net of 50 cents a share. Shares of the women's apparel retailer lost 3/8 to 32 9/16.
- Internet shares steamed forward on the Fed rate cut. Amazon.com picked up 22 1/4 to 148 1/2 after announcing plans to sell movies over its Web site. eBay was ahead 1 to 128 5/8, Inktomi 8 13/16 to 132, EarthLink Network 4 5/16 to 56 1/16, RealNetworks 2 3/4 to 41 1/4, and Infoseek 1 15/16 to 35 3/4.
- Last week's high-profile IPOs slumped. EarthWeb sank 7 9/16 to 54 11/16 and Theglobe.com retreated 6 13/16 to 41 15/16. The latter skyrocketed to a 606 percent gain in its Friday debut.
- K-tel International (KTEL) slid 5 5/8, or 32 percent, to 12. Nasdaq told the online music retailer that its level of tangible net assets falls shy of the minimum required to be listed on the Nasdaq Stock Market.