U.S. stocks sputter as rate-cut talk loses traction

By Daniel | March 10, 2008

NEW YORK (MarketWatch) — U.S. stocks lost ground for a third day on Monday as
hopes dimmed that the Federal Reserve might step in and cut interest rates before
next week’s meeting in the aftermath of an employment report that signaled the
nation may be in a recession.

“Investors haven’t made up their mind what the direction of the market should be
today –there was the belief that the Fed might have an emergency cut — I think
it’s a ridiculous theory, because the Fed has already had 225 basis points in
cuts, and they’ve got a meeting next week,” said Art Hogan, chief market
strategist at Jefferies & Co.

The Dow Jones Industrial Average ($INDU) was down 70.26 points to 11,823.43, with
22 of its 30 components on the decline and financials fronting the slide.

Citigroup Inc. (C) fell 2.8%, while American Express Co. (AXP) dropped 2.1% and
J.P. Morgan Chase (JPM) declined 1.6%.

Blue-chip gains were led by McDonald’s Corp. (MCD), up about 2%, after the
world’s largest fast-food chain reported same-store sales climbed 11.7% in
February from a year ago.

Off the Dow, other financial stocks surrendered as well, with large declines by
Ambac Inc. (ABK) and Countrywide Financial Corp. (CFC) pressuring the overall
market.

Shares of Ambac fell 22% after Citigroup analysts said the company’s $1.5 billion
share sale last week left the market unsatisfied and unconvinced about the firm.

Countrywide shares dropped 9.7% after a weekend report that the firm is being
investigated by the Federal Bureau of Investigation over possible securities
fraud.

The S&P 500 ($SPX) declined 9.09 points to 1,284.37 and the Nasdaq Composite
($COMPQ) eased 17.78 points to 2,194.71.

Volume on the New York Stock Exchange topped 473 million, and declining stocks
outran those advancing 3 to 1. On the Nasdaq, 305 million shares were exchanged,
and decliners outdid declining issues 2 to 1.

In early action on the New York Mercantile Exchange, crude-oil futures gained
$1.37 to $106.52 a barrel and gold futures fell $5 to $969.20 an ounce.

Fed factor

Earlier Monday, Goldman Sachs reiterated its view that the Federal Open Market
Committee would drop rates to 2% by late April, at a pace of half a percentage
point during each of its next two meetings. However, “we cannot rule out an
intermeeting rate cut today,” the Goldman strategists said.

The Commerce Department reported sales at U.S. wholesalers climbed 2.7% in
January, their fastest pace in nearly four years.

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