Stocks slide before Fed decision

Housing starts shot up 10.5% in August. The Fed meets to discuss monetary policy today. Bank of America reportedly plans to cut jobs. Airline profits are expected to soar this year.

By TheStreet Staff Sep 21, 2010 7:55AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 1:32 p.m. ET

 

Stocks were sliding as investors waited to see whether the Federal Open Market Committee would announce efforts to jolt the slow-growing economy.

 

At 1:32 p.m. ET, the Dow Jones Industrial Average ($INDU) was down 15 points, or 0.1%, at 10,738. The S&P 500 ($INX) was down 4.6 points, or 0.4%, at 1,138. The Nasdaq ($COMPX) was falling by 8.8 points, or 0.4%, to 2,347.

  

The Federal Reserve's policy-setting arm will meet today to discuss monetary policy. The FOMC is expected to keep its overnight lending rate near zero when it announces its decision at 2:15 p.m. ET. However, investors will look for other signs of upcoming quantitative easing measures.

 

"The economy appears to be hanging in there. From May to August, the numbers were broadly disappointing but in the past few weeks, they've been better-than-expected so I don't think the Fed should be discussing too many details about quantitative easing -- it could spook the market," said David Chalupnik, head of equities at First American Funds. "If the Fed statement is largely unchanged, I'd view that as a positive."

 

Alcoa (AA) was the worst-performing stock in the Dow, falling 1.4%, followed by Cisco (CSCO) and Travelers (TRV). Caterpillar (CAT) was leading the benchmark, rising 1.7%.

 

The Dow rose 146 points Monday after the National Bureau of Economic Research said the recession that began in December 2007 ended in June 2009, suggesting the economy is growing.

Homebuilders broke ground on 10.5% more homes in August as housing starts jumped to an annual rate of 598,000 from a revised 541,000 in July. Economists had expected housing starts to rise to 550,000.

 

Applications for building permits rose to 569,000, stronger than the 560,000 expected. That's up from 559,000 in July, the lowest rate since May 2009.

 

Shares across the homebuilding sector were trading broadly higher Tuesday with the SPDR S&P Homebuilders ETF (XHB) rising 0.6% to $15.66. Shares of KB Home (KBH), Meritage Homes (MTH) and M.D.C. Holdings (MDC) were all trading more than 1% higher.

 

Monday, the National Association of Home Builders/Wells Fargo confidence index suggested that conditions remain weak in the building industry. The gauge was unchanged in September at 13. Readings of less than 50 mean conditions are poor.  

 

In company news, Bank of America (BAC) plans to cut as many as 400 jobs in its global banking and markets units, according to Bloomberg, which cited an unidentified source. Bank of America shares were up 1% to $13.86.

 

Carnival (CCL) shares were rising 1.4% to $37.59 after the cruise operator boosted its full-year earnings forecast to a range of $2.48 to $2.52 a share, up from its previous guidance of $2.25 to $2.35. The revised outlook tops analysts' estimates of $2.36 per share. Rival Royal Caribbean (RCL) jumped 3.1% to $32.24.

 

Ford (F) isn't likely to be hurt by initial public offerings from General Motors or Chrysler, which could come as early as next year, according to a recent analyst report. Ford shares were rising 0.7% to $12.65.

 

ConAgra Foods (CAG) said its earnings will increase 5% to 7% this year instead of the 8% to 10% the company had forecast. ConAgra shares were falling 3.3% to $21.64.

 

Clorox (CLX) agreed to sell its auto-care businesses to private-equity firm Avista Capital Partners for $780 million. Clorox shares were down 0.2% to $67.47.

 

Capital IQ acquired rival market-data service provider TheMarkets.com for $300 million, according to The Wall Street Journal.

 

The International Air Transport Association, an airline trade group, raised its 2010 profit forecast for the industry to $8.9 billion from $2.5 billion in June but said it sees smaller gains next year.

 

In commodity markets, crude oil for November delivery was falling 96 cents to $73.90 a barrel. At 4:30 p.m. ET, the American Petroleum Institute will issue its weekly report on crude oil inventories. Analysts polled by Platts project a decline of 1.5 million barrels.

 

The December gold contract was falling $3.40 to $1,277.40 an ounce.

 

The dollar was trading slightly lower against a basket of currencies, with the dollar index down by 0.4%.

 

The benchmark 10-year Treasury note rose 8/32, diluting the yield to 2.677%.  

 

European stocks gained after Ireland sold 1.5 billion euros (almost $2 billion) in government bonds. The FTSE in London and the DAX in Frankfurt were adding 0.5%.

 

Hong Kong's Hang Seng rose 0.1%, while Japan’s Nikkei shed 0.3%.

 

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