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Archive for Thursday, June 28, 2001

Rate cut disappoints investors

Analysts say traders looking for ‘real fundamental guideposts’

June 28, 2001

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— Blue chips fell again Wednesday, registering their fourth consecutive losing session, after the Federal Reserve delivered a smaller interest rate cut than Wall Street wanted.

The Fed announced in midafternoon it was lowering short-term rates by 0.25 percentage point, half of what the market felt was necessary to restart the economy. It was the sixth cut this year.

The Dow Jones industrial average ended Wednesday down 37.64 at 10,434.84, after being up about 25 before the Fed announcement. The Dow fell more than 100 points on both Friday and Monday, and gave up 31 points Tuesday.

The broader market finished mixed. The Nasdaq composite index eked out a modest gain, up 10.12 at 2,074.74, essentially unchanged from where it stood prior to the Fed's move. The Standard & Poor's 500 index fell 5.69 to 1,211.07.

Investors have been anxiously awaiting signs that the five prior reductions each 0.5 percentage point have helped business pick up. But so far, corporate profit warnings topping 600 so far this quarter have indicated business remains weak in many sectors.

Analysts did not expect a rally to follow this latest rate cut, regardless of its size.

"I think the market is looking for real fundamental guideposts for true traction for a turnaround," said Philip Dow, managing director of equity strategy at Dain Rauscher Wessels in Minneapolis.

On Wednesday even sectors that typically are among the first to benefit from lower rates were among the decliners. Retailer Target fell $1.47 to $35.26, while banker J.P. Morgan Chase stumbled 66 cents to $44.02.

Among the day's biggest losers was CVS, which plunged $7.59, or 17 percent, to $36.51. The nation's second-largest drugstore operator warned that its earnings for the second quarter and for the year will be lower than expected because weak sales.

But most of the market's gains and losses were more moderate.

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