Wall Street: Tuesday close

By GRAEME BEATON
Updated:

 

ANOTHER sharp cut in interest rates and the hint of more to come caused hardly a ripple on Wall Street as investors looked ahead to the next round of quarterly profits reports.

Markets traded within narrow ranges on slow volume even after the Federal Reserve said it was lowering its key interest rate 0.5% to 4%, a seven-year low. The Dow Jones Industrial Average, up 56 points on Monday, edged down 4.36 points to 10,872.97. The Nasdaq Index, off 25 points on Monday, gained 3.80 points to 2,085.72.

The Fed, headed by Alan Greenspan, noted continued 'erosion in current and prospective profitability' and said 'the risks are weighted more toward conditions that may generate economic weakness in the future'.

Investors were already dwelling on profits and the outlook for companies trying to cope with a sluggish economy. 'June is a time for pre-earnings announcements and warnings,' said Larry Wachtel of Prudential Securities. 'The confessional season is approaching and that could drive the market for the next few weeks as we learn how companies are doing.'

Wal-Mart helped re-focus attention on performance. The world's biggest retaler met lowered quarterly forecasts by announcing a 4.1% rise in profits to $1.38bn. 'We have seen signs that consumers are becoming more cautious,' said chief executive H Lee Scott. 'As has historically been true, this is a good environment for Wal-Mart.'

Good environment or not, investors marked down Wal-Mart shares $2.35 or 4.3% to $52 apparently on the assumption that consumers becoming more cautious will eventually translate into tougher times for even the biggest of retailers.

Do-it-yourself leader Home Depot beat expectations and saw its shares jump 95 cents or 1.9% to $50.10. Deere & Co, which makes farm, garden and construction equipment, saw its net income dive 37% and said it would cut production in line with lower demand for its products. Deere lost $2.49 or 6% to $38.52.

Pharmaceuticals were lower as pressure emerged to cut drug prices and make more prescriptions drugs available over the counter. Merck dipped 79 cents or 1% to $75.90. Pfizer lost 34 cents or 0.8% to $42.97.

Digital wireless equipment maker Qualcomm jumped $2.73 or 4.8% to $59.65 after China announced it would go ahead with a massive network based on the company's technology.

Leading techs were mixed. IBM gained $1.02 or 0.9% to $113.58. Microsoft gave up 45 cents or 0.7% to $68.27. Intel was fractionally lower at $27.20.

Online and discount broker Charles Scwab, which employs Sarah Ferguson to promote its services, was flat at $19.60 after it said its client trading volume had dropped 39% in the past year. Customers withdrew $500m. from their accounts last month, the first net fall in assets since it started releasing figures in the mid-1990s.

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