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Wall Street jittery despite rate cut

Text by AFP

Latest update : 2008-10-29

The New York Stock Exchange remained hesitant despite the Fed's move to slash the key lending rate Wednesday, as the Dow Jones closed slighty down (-0.86%) and the Nasdaq new technology index edged up 0.47%.

US stocks closed mostly lower Wednesday in choppy trade despite a Federal Reserve half-point interest rate cut to help ease a credit squeeze and stimulate the sluggish economy.

The Dow Jones Industrial Average fell 77.26 points (0.85 percent) to finish at 8,987.86, while the Nasdaq rose 7.74 points (0.47 percent) to 1,657.21.

The broad-market Standard & Poor's 500 index retreated 10.42 points (1.11 percent) to 930.09.

The major indexes swung in and out of positive territory after Tuesday's huge bargain-hunting rally -- the Dow gained more than 10 percent -- following days of sell-offs.

Up more than 200 points a quarter of an hour before the closing bell, the blue-chip Dow took a nosedive after General Electric, the huge conglomerate seen as a bellwether of the economy, issued a profit warning on a 10-15 percent decline in sales in 2009, said Gregori Volokhine, an analyst at Meeschaert New York.

Earlier, the market had found support in the Fed's decision to lower its federal funds rate a half point to 1.0 percent, a historically low level last seen in 2003 and 2004.

"The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures," said the Federal Open Market Committee (FOMC) headed by chairman Ben Bernanke after the unanimous decision widely expected by financial markets.

In a glum statement, the Fed said that "downside risks to growth remain" for the world's biggest economy.

Some predicted the US central bank, which led a coordinated global rate cut earlier this month, could go even lower in an effort to jump-start lending and ease a global credit crunch.

"It is clear that the Fed has moved from a defensive, case-by-case crisis management approach in the summer months to an offensive and comprehensive attack on the deflationary forces in the economy and the credit markets in October," said Brian Bethune at IHS Global Insight.

"By removing inflation from the list of major risks to the outlook, the Fed is essentially giving itself carte blanche to move ahead full bore using all tools and facilities at its disposal," he said.

There was little on the US economic calendar. A soft report on monthly durable goods orders in September showed businesses remained cautious about investment in the uncertain economic climate.

Orders for big-ticket goods rose 0.8 percent in September from the prior month, led by gains in the defense and transportation sectors, particularly commercial aircraft, the Commerce Department reported.

The rise did little to erase an upwardly revised 5.5 percent decline in August, from a prior estimate of 4.5 percent.

Among stocks in focus, Kraft Foods fell 1.42 percent to 28.47 dollars and rival Kellogg dropped 1.30 percent to 50.02. Home and personal care products giant Procter & Gamble tumbled 3.54 percent to 60.99.

The three companies reported earnings that beat market forecasts, but P&G lowered its guidance, citing the uncertain environment.

ExxonMobil, the Dow's biggest component, slipped 0.28 percent to 74.65 despite crude oil prices that surged more than four dollars a barrel in New York.

In the tech sector, Motorola plunged 6.51 percent to 5.46. The Wall Street Journal reported the telecom equipment manufacturer plans to use Android, Google's open-source software platform, as the operating system for its showcase mobile phones, as well as cut jobs.

Google dropped 2.92 percent to 358.00.

Bonds slipped. The yield on the 10-year US Treasury bond rose to 3.874 percent from 3.820 percent Tuesday and that on the 30-year bond climbed to 4.238 percent from 4.172 percent. Bond yields and prices move in opposite directions.

Date created : 2008-10-29