US stocks barely budged yesterday as caution before the Federal Reserve's interest rate policy meeting tomorrow offset a pullback in crude oil prices and fresh merger activity.
The Dow industrials inched up to a fresh six-year closing high, but some investors held back to consolidate earlier gains. Stocks rallied last week after weaker-than-expected jobs data showed the Federal Reserve may have room to mark a pause in its cycle of interest rate increases.
Gains in semiconductor stocks, which rose after brokerage upgrades for Intel, supported the Nasdaq Composite Index. After the bell, the mood soured as Dell warned first-quarter earnings and revenue will be below forecasts.
"Late last week the markets were really pricing in the idea that the Fed would signal it is going to pause after this rate hike, but I think the closer the meeting gets, the more cautious the market will be," said Chip Hanlon, president of Delta Global Advisors.
The Fed is expected to raise short-term interest rates by a quarter percentage point tomorrow, but investors will be focused on the US central bank's accompanying statement for clues about the outlook for rates.
The Dow climbed to its highest close since January 2000 and passed the 11,600 threshold in intraday trading. The S&P hit its highest since February 2001, before it turned lower.
Crude for June delivery fell 42 cents to $69.77 a barrel, on hopes that tension over Iran's nuclear ambitions will ease.
"Some of the political risk in oil is coming out," Mr Hanlon said. "Lower oil prices, overall, should be a longer-term benefit to the economy."
But crude's fall pressured energy and oil services stocks, weighing on the S&P 500 index. Shares of Exxon Mobil, the world's largest publicly traded oil company, fell 0.5 per cent to $63.71 on the NYSE.
On the merger front, shares of Golden West Financial rose after Wachovia said it will buy the firm for $25.5 billion. Golden West rose almost 6.2 per cent to $74.90, but Wachovia fell 6.7 per cent to $55.42 amid concern it overpaid for Golden West.
Thermo Electron will acquire Fisher Scientific International in a stock-for-stock reverse merger, valuing Fisher Scientific at about $10.6 billion, the two companies said yesterday.
Thermo fell 2.3 per cent to $38.54 on the NYSE, while Fisher added 3 per cent to $75.95.
On Nasdaq, Intel shares rose 3.1 per cent to $20.11 after American Technology Research raised Intel to a "buy", while Caris & Co raised its rating to "above average". - (Reuters)
