Stocks close mixed as investors wait on the Fed

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June 23, 2009

By Malden Read and Tim Paradis The Salem News Tue Jun 23, 2009, 05:09 PM EDT

NEW YORK (AP) — Investors are holding off making big moves while they wait for the Federal Reserve.

Stocks ended mixed but little changed Tuesday, one day after a sell-off. Traders are looking for the central bank to outline its expectations for the economy and signal when it might raise interest rates. The Fed's two-day meeting ends Wednesday.

Traders reacted coolly to a report from the National Association of Realtors that May sales of existing homes rose 2.4 percent. The increase was smaller than economists' forecast for 2.8 percent, and not enough to alleviate investors' anxiety about economic reports later in the week on durable goods orders, new home sales and personal spending.

"There's not a lot of conviction on behalf of buyers," said Jim Herrick, manager of equity trading at Baird & Co.

The Fed is widely expected to keep its key interest rate near zero, but investors are unsure how optimistic the policymakers will be in their economic assessment, and whether the central bank will consider raising rates later this year to curb inflation.

Meanwhile, the market was also following the week's $104 billion in Treasury auctions. The government sold $40 billion in debt Tuesday amid strong demand. Investors have been on edge during such auctions because any signs that a desire for government debt is waning could hit the market.

Treasury demand needs to stay strong for the government to finance its bailout and stimulus programs without significantly raising yields. Bond yields affect borrowing rates for consumers.

The stock market is showing no signs of restarting the rally that lifted the Standard & Poor's 500 index 32.3 percent since early March. Investors who three months ago were buying stocks on upbeat data like Tuesday's home sales report are now more dubious about when an economic recovery will actually take hold. The Dow shed 201 points on Monday, the worst daily drop in more than two months.

According to preliminary calculations, the Dow Jones industrial average fell 16.10, or 0.2 percent, to 8,322.91. The Standard & Poor's 500 index rose 2.06, or 0.2 percent, to 895.10, and the Nasdaq composite index fell 1.27, or 0.1 percent, to 1,764.92.

The biggest loser among the 30 Dow stocks was Boeing Co., which fell $3.03, or 6.5 percent, to $43.87 after again delaying the first test flight of its long-awaited 787 jetliner. The company said it needed to reinforce part of the aircraft.

The recent selloff, however, has brought very little volatility, and that's a positive sign, said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York.

"The fact is, you can't keep going straight up," Fullman said. "There's a chance we'll still see some downward movement in the next week or two — the market really needs a correction."

Government bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.65 percent from 3.69 percent late Monday.

Falling stocks narrowly outnumbered those that rose on New York Stock Exchange, where volume came to a light 1.2 billion shares, down from 1.4 billion shares Monday.

The Russell 2000 index of smaller companies fell 3.04, or 0.6 percent, to 489.77.

After tumbling on Monday, the price of crude oil rose $1.74 to settle at $69.24 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies. Gold prices rose.

Overseas, Britain's FTSE 100 fell 0.1 percent, Germany's DAX index rose 0.3 percent, and France's CAC-40 fell 0.2 percent. Japan's Nikkei stock average sank 2.8 percent.

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