Market Snapshot: U.S. stocks make tentative gains as FOMC meets

Jan.29, 2008 in Market Outlook

U.S. stocks cautiously climb ahead of Fed decision

By Kate Gibson, MarketWatch

Last Update: 2:44 PM ET Jan 29, 2008

NEW YORK (MarketWatch) — U.S. stocks edged higher for a second day Tuesday, with
technology weighing on the broader market, as investors anticipated another
interest-rate cut on Wednesday from the Federal Open Market Committee.

“Investors have been buying shares on the view that, with the help from lower
rates, the U.S. economy can avert recession and corporate profits can rebound
during the second half of 2008 — there is now a lot riding on the Fed and its
announcement tomorrow,” said Frederic Ruffy, analyst at Optionetics.

The Dow Jones Industrial Average ($INDU) was up 58.6 points, or 0.5%, to
12,442.5, with 17 of its 30 components ahead, with telecommunications stocks
among the blue chips posting strong gains.

AT&T Inc. (T) was up 3.6%, and Verizon Communications (VZ) rose 1.3%.

The S&P 500 ($SPX) gained 4.73 points, 0.4%, to 1,358.69, while the Nasdaq
Composite (COMP) slipped 2.95 points, or 0.1%, to 2,352.86.

On the New York Mercantile Exchange, gold futures edged lower, with the contract
for February delivery ending off $2 at $925.1 an ounce after surging earlier to
another record high of $933.30 an ounce in electronic trading. See Metals Stocks
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Elsewhere on the Nymex, crude futures rose above $91 a barrel, with the contract
for March delivery up 76 cents to $91.75 a barrel. Read Futures Movers
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In currencies trade, the dollar was mixed, with the dollar index, which tracks
the performance of the greenback against six other major currencies, at 75.573,
compared with 75.590 in late U.S. trading Monday. Read Currencies
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Volume on the New York Stock Exchange topped 1 billion, and advancing stocks
pulled ahead of declining issues, about 5 to 3. On the Nasdaq, nearly 1.5 billion
shares exchanged hands, and advancing stocks ran ahead of those declining 5 to 4.

Fed factor

On Monday, stocks advanced after a bleak report on new-home sales spurred
speculation that the Federal Reserve would trim its rate target by at least 25
basis points in the wake of last week’s emergency 75 basis point cut.

The FOMC began its deliberations Tuesday afternoon, with a decision expected
Wednesday.

“We are looking for 25 basis points on both the discount and Fed fund rates,
based on some sense of stability in stocks, as well as credit conditions,” said
Tom DiGaloma, head of Treasury trading at Jefferies & Co. Inc.

Already ahead, stock futures ran higher after the Commerce Department reported
orders for durable goods rose 5.2% in December, far exceeding economists’
expectations of a 2.2% gain. Read Economic Report
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Other Tuesday data included the Conference Board’s consumer confidence index,
which fell in January, giving up much of the previous month’s gains. See Economic
Report
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And, another index, released by Standard & Poor’s, found the decline in U.S. home
values accelerating in November. Read more
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Fed interest-rate cuts might prevent a recession, but the spiral down for home
prices is likely not over, said Yale economics professor Robert Shiller. .

Active issues

Tuesday’s more active stocks included EMC Corp. (EMC), which posted a 35% gain in
fourth-quarter net income but also said revenue for its VMware Inc. subsidiary
fell short of expectations. EMC stocks were off 7.2%. See full story
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Taking an even larger hit were shares of VMware (VMW), down 33.9%. See story
Click for Detail.

Also under pressure, Sherwin-Williams Co. (SHW) fell 2.7% after the paint maker
offered a slight increase in fourth-quarter profit but warned first-quarter
results would likely fall short of Wall Street targets. Read More
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Countrywide Financial Corp. (CFC), in a deal to be acquired by Bank of America
Corp. (BAC), reported fourth-quarter losses of $422 million. Countrywide stock
was up 6.7%.

American Express Co. (AXP) was up 1% after it reported a 10% decline in
fourth-quarter net income after Monday’s close, with the credit-card company
setting aside more money to cover loan losses. Read more
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And, shares of Unisys Corp. (UIS) climbed 14.8% after the technology consulting
company posted fourth-quarter revenue that topped expectations.

Overseas, most Asian markets bounced back in the wake of Monday’s gains on Wall
Street. See Asian Markets
Click for Detail.

In Europe, shares traded on a pace to score their third rise in the past six
sessions. Read Europe Markets

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