Blue-chip stocks were pinned lower on Tuesday as Wall Street awaited the U.S. Federal Reserve ( news - web sites )'s decision on interest rates. A slew of downgrades on industry leaders such as Walt Disney Co. (NYSE: DIS - news ) also weighed on the market.
Technology stocks crept higher as an upbeat outlook from technology bellwether Cisco Systems Inc. (Nasdaq: CSCO - news ) boosted hopes the battered tech sector may soon see a rebound in sales and profits.
"The news is mixed so stocks are mixed," said Richard Sichel, chief investment officer at Philadelphia Trust Co. "We've had a decent earnings report by Cisco, but markets have a wait-and-see attitude about the Fed rate cut. Fifty basis points are better than 25 basis points."
Money managers and traders said there was little doubt the Fed would cut rates. The only question was how much.
The technology-laced Nasdaq Composite ( IXIC - news ) wavered between gains and losses, most recently gaining 0.25 of a point, or 0.01 percent, at 1,793.90.
Trading was light, with 370 million shares traded on the Big Board and 624 million on Nasdaq. About 14 stocks fell for every 13 that rose on the New York Stock Exchange ( news - web sites ), while there were eight decliners for every seven gainers on Nasdaq.
Struggling energy giant Enron tumbled $1.30 to $9.85 -- the lowest since 1992. The stock, which was the most active on the NYSE, has sunk on accusations the company failed to explain billions of dollars in balance-sheet charges and write-downs.
The broader market has rallied recently on optimism this year's nine rate cuts by the Fed will help get the economy back on its feet. Wall Street is predicting the central bank will chop rates by as much as a half point, putting them at their lowest level in four decades.
In a Reuters poll on Friday, 15 of the 24 dealers of U.S. government securities predicted the Fed will cut rates by a half point. That would bring the fed funds rate, which influences borrowing costs across the economy, down to 2 percent. Still, worries abound.
"You've got terribly grim economic news and most people are in the 50-basis-point camp, but it's not a cut and dried case," said Holly Liss, a technical strategist for Fuji Futures. "If it turns out to be 25 basis points, stocks may get hurt in here."
The Fed's decision is expected at 2:15 p.m. (1915 GMT). Lower interest rates can be positive for stocks as they cut borrowing costs and may spur business development.
Cisco was the most-active Nasdaq stock and gained 43 cents to $18.31. The maker of networking gear that helps power the Internet reported profits that beat estimates. Cisco said sales rose from the prior quarter, suggesting the worst may be behind the sector. The company also forecast revenues will be flat to slightly higher in the next quarter.
In addition, Cisco said it had purged $834 million of excess inventory, making progress in shedding $2.2 billion in inventory it is writing off because of weak demand.
Microsoft Corp. (Nasdaq: MSFT - news ) inched higher by 25 cents to $63.49. The 18 states in the company's antitrust case said on Tuesday they were split over backing a settlement, with one-third opposed to the deal reached last week between the company and the U.S. Justice Department ( news - web sites ), and another third prepared to sign it. The remainder were undecided and were granted until later on Tuesday to make up their minds.
Disney weighed on the blue chip Dow average, falling 70 cents to $18.46, after investment bank Goldman Sachs cut its rating on the media giant, citing an anticipated drop in the company's 2002 earnings.