Originally published April 30, 2008 at 12:00 AM | Page modified April 30, 2008 at 6:02 PM
Stock gains evaporate as Fed leaves investors guessing about rate outlook
Wall Street gave up sharp gains and closed lower today after the Federal Reserve cut interest rates by a quarter point but left investors...
The Associated Press
NEW YORK — Wall Street gave up sharp gains and closed lower today after the Federal Reserve cut interest rates by a quarter point but left investors guessing about the central bank's next move.
The Dow Jones industrial average fell 11.81 to 12,820.13, after trading up 178 points shortly after the Fed's announcement.
Microsoft, one of the 30 Dow stocks, fell 12 cents to close at $28.52 a share. Boeing, also a Dow stock, sank 60 cents to $84.93.
Broader stock indicators also closed down, having given up steep gains. The Standard & Poor's 500 index fell 5.35 to 1,385.59, and the Nasdaq composite index fell 13.30 to 2,412.80.
The Fed's statement today made it clear the central bank is less worried about economic growth than in March, when it pointed to "downside risks to growth." The Fed said that while the economy remains weak and the inflation outlook remains uncertain, its rate cuts and lending efforts over the past several months "should help promote moderate growth over time and to mitigate risks to economic activity."
But what was less certain was whether the central bank is confident enough about the economy to make inflation a top priority and keep interest rates on hold.
"It feels as if they're going to pause," said Kim Caughey, equity research analyst at Fort Pitt Capital Group. She said, though, that she was surprised the Fed stated that it "expects inflation to moderate in the coming quarters."
"I think they're being clear that they're not 100 percent sure about what the next step is," Caughey said.
With economic data in recent weeks coming in anemic but not as bad as expected, inflation has appeared to Wall Street to be the growing threat, due to rising food prices, crude oil near $120 a barrel and U.S. roadside gasoline prices surging above $3.60 a gallon.
"The market had wanted to hear tougher talk on inflation, and some sort of talk that the easing has been adequate for a while, for the foreseeable future," said Scott Wren, equity strategist for Wachovia Securities.
Copyright © 2008 The Seattle Times Company
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