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MARKET PREVIEW: All eyes on the Fed

Trading is likely to be light as investors hold their breath for the Federal Reserve's expected interest cut Tuesday afternoon. The Dow is set to open slightly higher.

Most economists still believe the Federal Reserve will cut rates by 50 basis points, or a half percentage point, the fifth such cut in 2001. Some analysts have suggested a smaller, quarter-point cut is also likely.

If the Fed does make a half-point cut, a less aggressive stance on interest rates could be the result, judging from recent data which has shown the economy is curbing its fall. Investors will put just as much weight on what policy makers say in Tuesday's meeting as the size of the rate cut announced.

Should the Fed indicate that it won't automatically cut interest rates, investors could sell shares.

Stocks to Watch

  • (Nasdaq: ACOM) has become the latest Internet -consulting company to announce layoffs. The firm said it will cut 350 jobs, reducing its workforce by 25 percent, after reporting that its first-quarter loss widened to 27 cents a share, from 12 cents a year earlier. founders Chan Suh and Kyle Shannon will sell their shares to Seneca Investments, a holding company formed by Omnicom Group (OMC) and Pegasus Partners II, raising Seneca's stake in to 65.7 percent from 45.3 percent.

  • Clarent (Nasdaq: CLRN) also announced layoffs. The software maker said it will cut about 10 percent of its workforce, or 90 full-time workers and 20 contract employees, as part of a plan to reduce costs. The company expects to take a charge of $20 million in the second quarter.

  • Computer Sciences (NYSE: CSC) reported a fourth-quarter loss of 22 cents a share because of costs related to job cuts and an acquisition in the period ended March 30, compared with net income of 84 cents a year earlier. Excluding charges and certain expenses, the computer-services company said its profit would have been 36 cents, just topping First Call estimates by a penny. The company also warned that profit in the current period will fall short of analysts' predictions.

  • Semiconductor maker Applied Materials (Nasdaq: AMAT) may also see some attention ahead of its second-quarter report after the closing bell. The company is expected to post an earnings drop to 33 cents a share from 53 cents a year earlier according to First Call.

    At the Bell

    The Dow Jones industrial average may open 17 points higher. The Standard & Poor's 500 index for June futures contracts was up 2 points to 1,254 at 7:15 a.m. EDT in 24-hour electronic trading.

    Reuters contributed to this report.