US stocks: Markets end rough session little changed

NEW YORK - US blue chip stocks ended a volatile session little changed on Tuesday, after the US Federal Reserve nudged interest rates higher for the eighth straight time, and retained its vow for "measured" increases.

The market recouped an earlier loss in the final minutes of the session as the Fed revealed it inadvertently omitted a sentence from its formal statement saying longer-term inflation expectations remained well-contained -- easing fears of more aggressive interest rate hikes.

Technology shares held up, boosted by a 2.3 per cent rise in Dell Inc.

But Tyco International Ltd. weighed on the S&P 500 Index, falling nearly 7 per cent, after the conglomerate lowered its full-year earnings outlook.

The Dow Jones industrial average finished up 5.25 points, or 0.05 per cent, at 10,256.95. The Standard & Poor's 500 Index was down 0.99 of a point, or 0.09 per cent, at 1,161.17. The Nasdaq Composite Index ended up 4.42 points, or 0.23 per cent, at 1,933.07.

Prior to the Fed's announcement at around 2.15pm, the Dow and S&P were little changed, while the Nasdaq was moderately higher. But stocks dipped after the rate hike, then rallied higher, fell back, and finally recovered.

"If you're bullish you hang onto the positive statement and if you're bearish you hang onto the negative statement," said Elliot Spar, market strategist with Ryan Beck & Co.

"They said inflation was expected to be contained. They also said that companies have more pricing power and that inflation pressures have picked up, and left the door open to further rate hikes," Spar said.

Wall Street had expected the rate increase and investors were relieved that the wording of the statement was similar to the March statement.

Some concerns remained over inflation, although these were somewhat relieved by a second announcement from the Fed just before 4:00 p.m. adding that longer-term inflation expectations were well contained.

That "could have helped the market" in the final minutes of trading, said Spar. "There was a nice pop. It was important to have it in but they'd already said that underlying inflation was expected to be maintained. Now they're a little more specific and that's a positive."

After the closing bell, insurer MetLife Inc. rose 6 per cent to US$41.12 on the Inet electronic exchange, as its first-quarter profits exceeded Wall Street expectations.

But Electronic Arts Inc, the world's largest video game publisher, slid nearly 12 per cent to US$46.66 as it forecast a net loss for the current quarter.

Among stocks moving during the ordinary trading session, Dell gave some support to the Nasdaq, up 2.3 per cent to US$35.75. Early Tuesday, Taiwan's Quanta, a contract maker of notebook computers for Dell and others, reported lower quarterly earnings but an analyst said the second quarter was likely to show improvement.

Business software maker Siebel Systems Inc. rose 6.6 per cent, or 59 cents, to US$9.50 on speculation the business-software maker might be sold.

Boeing Co. and Lockheed Martin Corp. both gained. Company analysts said they could see enhanced profitability as early as 2006 from plans to combine their rocket launch units into a 50-50 joint venture. Boeing rose 49 cents to US$59.87, while Lockheed gained 55 cents to US$62.41.

Tyco fell US$2.07 to US$28.65.

Energy companies dipped as US light crude fell below US$50 a barrel. Exxon Mobil Corp. dropped 2.2 per cent, or US$1.24 to US$56.50 and ConocoPhillips was down 3 per cent, or US$3.20 at US$103.50.

Crude for June delivery settled at a fresh 10-week low of US$49.50, down US$1.42, or 2.8 per cent, wiping out its US$1.20 gain on Monday on the New York Mercantile Exchange.

While lower oil prices can hurt energy companies profits, they help the market overall as they boost corporate earnings and consumer spending.

Trading was active, with 1.67 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.86 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Advancers and decliners were roughly even on the NYSE. Decliners outnumbered advancers by about 8-to-7 on Nasdaq.

- REUTERS