Stocks End Higher on Hopes of Fed Easing
After seesawing for most of the session, stocks held gains to finish higher on hopes the Federal Reserve will lower interest rates Wednesday, subsequently boosting the slowing economy and corporate earnings prospects.
"Everyone is going to wait and see what the Fed does," David Briggs, head of stock trading, Federated Investors, told Standard & Poor's AdvisorInsight.
"I'm a little cautious ahead of the meeting, because I think the market has come a long way in a short amount of time," and "could be vulnerable to some sort of disappointment, or renewed concerns that the recovery is going to take longer," Briggs added.
Rate hopes aside, Wall Street mulled more bad news from companies. Computer networking company Cisco Systems Inc. (CSCO ) warned of slower sales, and added its current fiscal quarter looked more challenging than a few weeks ago.
Telephone and cable television giant AT&T Corp. (T ) posted a 51% drop in fourth-quarter profits due to stiff competition and falling prices in the long-distance telephone market, and said it expects consumer revenues to continue shrinking.
And DaimlerChrysler AG confirmed it will drastically cut its Chrysler workforce in a bid to return the faltering U.S. unit to profitability.
Despite the news from the big names, many on Wall Street stayed on the sidelines in anticipation of Wednesday's Federal Open Market Committee decision on interest rates. Trading volume was light.
Additionally, money shifted away from defensive health care-related issues into financials and techs. Cisco aside, techs were led higher by large-cap names including Sun Microsystems (SUNW ), Dell Computer Corp. (DELL ), Oracle Corp. (ORCL ) and Siebel Systems (SEBL ).
The Dow finished up 42.21 points, or 0.40%, at 10,702.19, while the Nasdaq ended higher by 56.68 points, or 2.04%, at 2,837.98. Meanwhile, the broader S&P 500 closed up 9.16 points, or 0.68%, at 1,364.11.
In other markets, the dollar was firmer versus the euro, and oil futures traded higher.
Treasuries ended lower as corporations competed for funds. On Tuesday, Wall Street is expected to wrestle with more economic data - a monthly report on consumer confidence. A more closely watched gauge of the economy, the monthly unemployment rate, is expected Friday.
The fresh batch of economic data this week is expected to confirm existing reports of a sagging economy. On Wednesday, the FOMC is scheduled to slash interest rates by 50 basis points to boost a slowing U.S. economy, and help lift lower corporate profits.
Stocks in the News
The Walt Disney Co. (DIS ) said it will close its Internet portal Go.com, cutting about 400 jobs and taking a charge in the second-quarter in a major overhaul of its online strategy, Reuters reported. The company will also dissolve its online tracking stock, Disney Internet Group (DIG ), converting its shares into common stock on the parent company as of Mar. 20.
Xerox Corp. posted a loss for the fourth quarter as the troubled copier giant's sales fell 13%, hurt by a slowing economy and tough competition.
Anglo-Dutch consumer products group Unilever on Monday it was selling some dry soup and sauces businesses in Europe to Campbell Soup Co. (CPB ) for $925 million to ease regulatory concerns after the takeover of Bestfoods.
By Heesun Wee in New York