- NEW YORK (Reuters)
- Stocks sagged on Tuesday after the Federal Reserve left interest rates
unchanged at 40-year lows and warned of weak economic conditions, jolting
investor confidence that the economy was on the road to recovery.
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- Before the Fed's announcement stocks were higher but
erased gains. Some investors had hoped the Fed would cut rates to underpin
growth and avoid a double-dip recession, defined as two periods of recession
separated by a brief upturn. Others fretted the Fed's warning pointed to
prolonged softness.
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- "The market always looks favorably on lower rates,
but in this case the Fed is saying there are risks there for more economic
weakness ... and for a lot of people, double dip is on their minds,"
said Mark Donahoe, managing director of institutional sales trading at
U.S. Bancorp Piper Jaffray.
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- The Fed's statement did leave the door open for further
cuts, and some investors said the selloff would be brief.
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- "Initially it will be negative but I don't think
there will be bloodshed on the Street," said Peter Cardillo, chief
strategist for Global Partners Securities. "The Fed is acknowledging
we could get a double dip, so they prepare for a rate cut by the end of
the year if things don't get better. It's really mixed news for the market."
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- The Dow Jones industrial average .DJI was down 206.43
points, or 2.38 percent, at 8,482.46, according to the latest available
figures. The broader Standard & Poor's 500 Index .SPX was down 19.58
points, or 2.17 percent, at 884.22. The technology-laced Nasdaq Composite
Index .IXIC was down 37.52 points, or 2.87 percent, at 1,269.32.
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- More than 2 stocks fell for every 1 that gained on the
New York Stock Exchange and the Nasdaq. Trading was moderate, with 1.28
billion shares traded on the Big Board, and 1.60 billion exchanged on Nasdaq.
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- The Federal Reserve kept its key fed funds rate -- the
overnight bank lending rate -- steady at 1.75 percent, but changed its
view to acknowledge risks to the world's largest economy are now tilted
toward weakness rather than evenly balanced between weakness and inflation.
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- Blue-chip stocks racked up a four-day rally last week,
partly pegged to speculation the central bank would cut rates as early
as this week to shore up the economy. A spate of recent economic data had
sparked investor fears of a double-dip recession.
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- "Equities were hoping for a rate cut," said
Jack Caffrey, equity strategist for JP Morgan Private Bank, which oversees
$280 billion. "The Fed has confirmed the economy is weaker than they'd
like to see."
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- The Fed slashed interest rates 11 times last year in
its most aggressive wave of easing ever to help stave off a deep recession.
Still, the S&P 500 index .SPX has tumbled 32 percent since the end
of 2000, and the stock market's slide has sucked away trillions of dollars
in investor wealth.
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- In company news, Andrx Corp. ADRX.O fell $2.78, or 12
percent, to $20.54 after the drug maker said it overstated money owed to
it from 1999 through June 2002, and that an employee appears to have altered
the company's accounts receivable records.
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- Andrx is seeking a five-day extension for filing its
financial records with the Securities and Exchange Commission.
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- Retailers posted a mixed bag of quarterly earnings,
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- Tiffany & Co. Inc. TIF.N reported lower earnings
but the luxury jeweler said the outlook for the rest of the year was brighter.
The forecast pushed the company's shares up more than 7.6 percent, or $1.63
to $23.19.
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- Deere & Co. DE.N surged $4.18, or 10 percent, to
$46.20. The world's largest farm equipment maker said profits more than
doubled as it cut costs and new products caught on in Europe.
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- American Airlines , the operating unit of AMR Corp. AMR.N
, said it will cut 7,000 jobs by March 2003, retire aircraft and cut capacity,
the company said. AMR stock rose 38 cents to $8.74 as investors hoped the
restructuring would improve profits.
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- Six Flags Inc. PKS.N was the Big Board's biggest percentage
loser, dropping $6.83, or 58 percent, to $5.03 after the theme park operator
reported quarterly results that fell considerably short of analysts' estimates
after lower revenues from a year ago.
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- PDI Inc. PDII.O , a provider of sales and marketing staff
to big drugmakers, tumbled almost 50 percent, to an all-time low, after
reporting a quarterly loss on disappointing returns from key sales contracts.
Shares lost $6.44 to $6.54, making it the biggest percentage loser on the
Nasdaq.
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