Market Closes Cautiously Before Coming Fed Move

Wall Street finished with a mixed performance today, as investors traded cautiously ahead of the Federal Reserve's decision tomorrow on interest rates.

The Fed, facing a faltering economy but also rising inflation, is expected to cut interest rates by another quarter point after its two-day meeting concludes tomorrow. Many investor believe policy makers will then signal that they are planning to hold rates steady for a while.

Consumers have been worried about inflation because it means energy and grocery bills are harder to pay. Wall Street is also concerned, because inflation tends to curtail consumer spending, which accounts for more than two-thirds of the American economy.

The Conference Board said today its April index of consumer confidence fell for the fourth straight month because of heightened disappointment about soaring prices and the weakening job market.

"There's no panic out there (in the market) because of the consumer confidence numbers, but there is more concern about inflation then we had just a few weeks ago," the director of equity trading at Baird & Co., Jim Herrick, said "Everyone is interested in what the Fed will do about it."

According to preliminary calcuations, the Dow Jones industrial average fell 39.81, or 0.31%, to 12,831.94.

The biggest drag on the Dow was the component Merck & Co., which sank $4.30, or 10.4%, to $37.14 after saying the Food and Drug Administration refused to approve a new cholesterol drug called Cordaptive.

Broader markets were mixed. The Standard & Poor's 500 index dipped 5.43, or 0.39%, to 1,390.94, and the Nasdaq composite index rose 1.70, or 0.07%, to 2,426.10.

A pullback in oil prices today eased inflationary concerns a bit, and helped keep the stock market from tumbling sharply. But some analysts say the market has been deceptively calm in recent weeks given the weakness of the economy and how consumers are struggling not only with a slumping housing and job market but also high prices.

"So far, investors have bought into the notion that the Federal Reserve has staved off a wider calamity, when in fact what they've done is allow financial system to stay afloat as they work down, write down, a tremendous amount of bad debt," the chief investment officer at Ryan Beck & Co., Joseph V. Battipaglia, said.

Slashing the key rate by more than half since last summer has not trickled down to consumers' borrowing rates, he noted, and instead has "punted the dollar. It's sparked commodity runs. It has translated to spikes in food and energy costs for the public at exactly the wrong time."