Wall Street stocks closed lower today after the Federal Reserve announced a quarter-percent interest rate cut, less than what most investors had hoped for.
The Fed cut the overnight bank lending rate to 5.25 percent from 5.5 percent, the first such cut in nearly two-and-a-half years. It said the cut was implemented to "cushion the effects of international weakness on the U.S. economy."
The Dow Jones Industrial Average tumbled as much as 93.21 points. The blue chip index managed to regain some of the loss to close down 28.32 points or .35 percent, at 8,080.52. The technology-heavy Nasdaq Composite Index also closed lower, losing .3 percent or 5.15 points, at 1,734.07.
Before the announcement by the Federal Open Market Committee and Federal Reserve, the blue chip index had zigzagged, rising as much as 38.1 points and then falling as much as 41.97 points.
Among technology stocks that took a hit today, Fore Systems saw its shares shed 3.25 points or more than 16 percent to close at 15.9375. The company, which is tentatively scheduled to report its earnings on October 15, typically generates the bulk of its revenues toward the end of each quarter. However questions remain on Wall Street as to whether the maker of high-performance networking products based on Asynchronous Transfer Mode (ATM) technology will meet analysts' expectations of a profit of 14 cents a share for its second quarter.
Nortel Networks, formerly Northern Telecom, also saw its shares fall hard today, as they dropped 12.8 percent before trading was halted on the issue. The company disclosed in an analysts' meeting today that its third-quarter revenue growth would be in the low double digits--lower than analysts' expectations. The company said, however, that its third-quarter profits and yearly results will be in line with Wall Street's expectations.
While most analysts had expected today's rate cut, they were hoping for a more aggressive one. If the Fed had reduced rates by half a percent, as most investors had hoped for, the market would have reacted more enthusiastically, one analyst noted.
Last week, Federal Reserve chairman Alan Greenspan gave a blunt warning that the overseas economic turmoil could spread to the United States and cause a slowdown in the American economy. He added that the global market gloom would more than offset a rise in domestic inflation.
One analyst noted, however, that Wall Street already has accounted for the interest rate cut in the price of stocks.
"The key issue here is how sustaining an upward movement will this make it," said Norma Yaeyer, president of Yaeger Capital Markets. "It is difficult to know. Unfortunately, it's a little like throwing dice."
News.com's Dawn Kawamoto contributed to this report.