NEW YORK -- U.S. stocks fell yesterday amid concern that the Federal Reserve won't lower interest rates as soon as some investors expected. A rally in technology issues tempered the decline.
Shares of banking and financial companies fell after two reports showed the economy isn't slowing as much as expected, making a move by the Fed to stimulate growth with lower rates less likely. Stocks are trading near record highs on the bet that rates will fall, borrowing costs will drop and profits will rise.
"My gut reaction is the Fed isn't going to do anything," said Todd Clark, senior trader at Rodman & Renshaw Inc. "The market's gotten a little bit aggressive pricing-in an easing."
The Dow Jones industrial average fell 6.23, to 4,550.56, in a roller-coaster session that saw the 30-stock average fall as much as 34.59 points after gaining as much as 20.75 shortly after the open. The decline -- the average's sixth drop in the past eight sessions -- came a week after the Dow industrials registered a record high of 4,589.64. Shares of Chevron Corp., J. P. Morgan & Co. and Minnesota Mining & Manufacturing Co. paced the retreat.
Among broad market indexes, the Standard & Poor's 500 index fell 0.86, to 543.87, after being down as much as 3.94 points. Gains in semiconductor, software, computer and chemical issues offset losses in telephone, oil and retail issues.
Among the biggest losers on the day were banking companies, whose profits tend to pick up when rates fall because lending increases and profit margins don't narrow. Suntrust Banks Inc. fell $1.25, to $57.625; Wells Fargo & Co. slid $3, to $182.625; Bank of New York Co. gave up 37.5 cents, to $40.875; Bankers Trust New York Corp. wilted $1.125, to $61.625; and First Interstate Bancorp fell 25 cents, to $80.625.
Among other financial issues, Household International Inc. slumped 62.5 cents, to $49.375; Federal Home Loan Mortgage Corp. fell 87.5 cents, to $68.625; Federal National Mortgage Association gave up 37.5 cents, to $95.125; and First Financial Management Corp. fell 12.5 cents, to $84.875.
The technology-laden Nasdaq composite index, meanwhile, jumped 6.29, to 926.81, its biggest gain in a week. The index is up 16 of the past 22 sessions, although still below its all-time high of 940.09, reached last Thursday.
The gain was led by Microsoft Corp., Intel Corp. and MCI Communications Corp. Bay Networks Inc.'s shares rose $1.75, to $41.25, amid expectations that the company's fiscal fourth-quarter earnings will exceed estimates, analysts said.
About six stocks fell for every five that rose on the New York Stock Exchange, where about 316 million shares traded hands. The three-month daily average is 342 million.
Technology shares rebounded from a four-day skid. They'd rallied for seven months amid optimism that computer, software and semiconductors will be among the few companies whose profits will be able to withstand a general slowdown in the economy.
DSC Communications Corp. rose 50 cents, to $45.625; Adobe Systems Inc. jumped $1.875, to $58.375; Xilinx Inc. gained $3.50, XTC to $97; Dell Computer Corp. added $1.125, to $60.375; Motorola Inc. rose $2, to $66.25; and Texas Instruments Inc. climbed $4.125, to $136.875.
Profit gains have grown in importance of late because investors don't take to earnings disappointments lightly, analysts said. On Wednesday, Polaroid Corp. and Westinghouse Electric Corp. each saw their shares fall more than 3.5 percent after they announced they wouldn't meet estimates for the three-month period ending today.
And yesterday, shares of Adolph Coors Co. fell $1.50, to $15.625, after the brewer said second-quarter earnings dropped 37 percent, the result of a steep decline in sales of its Zima beverage. The company's earnings of 40 cents a share fell well below the 56 cents analysts expected.