- The Washington Times - Wednesday, March 18, 2009

NEW YORK (AP) - Stocks gave back some of their recent gains Wednesday as investors awaited details from the Federal Reserve’s meeting on interest rates.

The Fed is expected to leave rates at their historically low levels, but the market is anxious to see how the central bank assesses the economy in its statement accompanying the rate decision. Investors also want to know if the Fed has any further moves planned to help boost the economy. The Fed news is expected at midafternoon.

The slight pullback marked a pause in the market’s blockbuster advances over the past week which have lifted major market indicators more than 10 percent on growing optimism that U.S. banks may be returning to profitability and other positive economic news.

In corporate news Wednesday, International Business Machines Corp. is in discussions to buy Sun Microsystems Inc. for at least $6.5 billion in cash, in a potentially positive sign for the economy as companies become more aggressive in making acquisitions.

News of the IBM-Sun talks pushed technology stocks higher.

Financial shares, which have been leaders of the rally over the past week, also posted gains, as did utility stocks. Energy, industrials and consumer staples slumped.

In early afternoon trading, the Dow Jones industrial average fell 53.60, or 0.7 percent, to 7,342.10. The Standard & Poor’s 500 index fell 1.29, or 0.2 percent, to 776.83, while the technology-heavy Nasdaq composite index rose 7.06, or 0.5 percent, to 1,469.17.

Stocks had their fifth advance in six days Tuesday after a surprisingly strong report on home construction and building permit applications. Since the rally began last week, the Dow has gained 849 points, or 13 percent, while the S&P; 500 index is up 15 percent.

The market’s tone has improved considerably in recent days. Investors are starting to believe that the market may have finally found a bottom and that this advance could be different from the disappointing, short-lived rallies they’ve seen before.

Stocks had gained 20 percent from late November until the start of the year, only to come crashing down to levels not seen in more than a decade as worries grew about the stability of the financial system and the economy’s ability to turn around.

Analysts were taking the market’s decline on Wednesday in stride, noting that recent optimism has not been dampened.

“It’s normal to have a pullback as we’re seeing today,” said Jim Herrick, director of equity trading at Baird & Co. “There’s some hope that we have seen a bottom and that we are slowly working our way out of this recession.”

Nicholas Colas, chief market strategist at BNY ConvergEx Group, was encouraged by gains in retail and financial stocks.

“Overall, I’d say it’s a pretty healthy day because the right sectors are rallying,” he said. “All the sectors that you would expect fund managers to buy in a recovery are performing well.”

Among retail stocks, Wal-Mart Stores Inc. rose 19 cents to $50.19.

Bank of America Corp. was helping lead other banks higher. Its shares rose 65 cents, or 10.4 percent, to $6.92 after reports its chief executive, Ken Lewis, said it could repay the government’s $45 billion investment as early as this year.

Citigroup Inc. soared 45 cents, or 18 percent, to $2.96, while Wells Fargo & Co. gained 47 cents, or 3.2 percent, to $15.13.

Shares of IBM fell $2.32, or 2.5 percent, to $90.59. Sun shares skyrocketed more than 80 percent on the possible takeover news, rising $4.02 to $8.99.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.95 percent from 3.01 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.21 percent from 0.22 percent late Tuesday.

The Russell 2000 index of smaller companies added 1.90, or 0.5 percent, to 405.49.

Declining issues were relatively even with advancers by early afternoon on the New York Stock Exchange, where volume came to 775.9 million shares.

Investors appeared little fazed by the Labor Department’s report that the consumer price index rose 0.4 percent in February, just above the 0.3 percent expected by economists polled by Thomson Reuters. A jump in gasoline prices was the primary reason for the increase in prices paid by consumers during the month.

Core inflation, which excludes food and energy, rose 0.2 percent in February, slightly higher than the 0.1 percent economists expected.

The dollar was mixed against other major currencies. Gold prices fell.

An unexpected build in gasoline inventories helped send oil prices lower. Oil prices declined 86 cents to $48.30 per barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average rose 0.3 percent. Britain’s FTSE 100 fell 1.4 percent, Germany’s DAX index rose 0.2 percent, and France’s CAC-40 declined 0.3 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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