- The Washington Times - Tuesday, February 21, 2006

NEW YORK (AP) — Stocks drooped yesterday after a robust reading on the economy, and the most recent meeting of the Federal Reserve and the continuation of a solid earnings season cemented the feeling on Wall Street that additional rate increases are a near certainty.

The sell-off, which followed a higher opening, began after the Conference Board said its Index of Leading Economic Indicators rose sharply in January. The index, a closely watched gauge of future economic activity, is designed to take the pulse of the economy in the near term. It rose 1.1 percent in January after a 0.3 percent increase in December.

The economic indicator reading was almost twice as high as analysts expected, providing one more sign that “there’s growth still there in the economy, and the Fed’s going to have to do its magic by continuing to raise interest rates,” said Kim Caughey of Fort Pitt Capital Group.

Minutes from the most recent meeting of Fed policy-makers underscored the point, with Fed governors saying further rate increases might be needed.

Strong results from Federated Department Stores and the Home Depot couldn’t distract the market from interest rate worries. Less stellar results from Wal-Mart further darkened the mood.

The Dow Jones industrial average fell 46.26, or 0.42 percent, to 11,069.06. The Dow rose past Thursday’s 4-year high in opening trading before retreating.

Broader stock indicators were lower. The Standard & Poor’s 500 Index fell 4.20, or 0.33 percent, to 1,283.04, and the Nasdaq Composite Index fell 19.40, or 0.85 percent, to 2,262.96.

The Russell 2000 Index of smaller companies fell 4.16, or 0.57 percent, to 726.78.

Bonds were lower, with the yield on the 10-year Treasury note at 4.57 percent, up from 4.54 percent late Friday. The dollar was mixed against major currencies. Gold prices were higher.

Crude-oil futures climbed after militant attacks on oil pipelines in Nigeria. A barrel of light crude settled at $61.10, up $1.22 on the New York Mercantile Exchange.

In recent weeks, investors have been revisiting their chronic concern: Will the Fed raise interest rates so high that the economy will plunge into recession?

There’s little to make the Fed stop. The fourth-quarter earnings season is more than 85 percent complete and the Standard & Poor’s 500 is on track to beat analysts’ estimates for its total returns, according to JP Morgan Chase. Earnings-per-share growth is close to 14 percent, making it the 15th straight quarter of double-digit earnings growth.

Federated fell $1.24 to $70.39 after its 2006 earnings projection fell short of analysts’ estimates. The company’s fourth-quarter net income rose 59 percent from last year, aided by the acquisition of former rival May Department Stores Co.

Home Depot rose 1 cent to $41.87 after it reported a 23 percent jump in quarter ly profit on a solid increase in sales. Same-store sales rose 5.5 percent. The results beat estimates.

Wal-Mart fell 36 cents to $45.74 after its fourth-quarter revenue fell short of Wall Street projections, and it also forecast profits below analysts’ estimates. The company’s earnings rose 13.4 percent after aggressive holiday advertising helped boost sales by 8.6 percent.

RadioShack fell 8 cents to $19 after the board said Monday it had accepted CEO David J. Edmondson’s resignation. The stock dipped to a three-year low Friday after RadioShack announced its fourth-quarter results.

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