Markets drift higher ahead of Fed meeting

Confident the Federal Reserve won't raise interest rates tomorrow, investors push stocks up modestly.

3 min read
Stocks posted modest gains on the eve of the Federal Reserve's scheduled meeting over interest rates.

The Nasdaq rose 22.81 to 3,953.15, and the Standard & Poor's 500 index climbed 7.76 to 1,499.48.

The Dow Jones industrial average rose 33.33 to close at 11,079.81 led by Boeing, which gained $2.06 to $47.75.

At the end of regular trading, Intel gained $1.50 to $72.06, and Microsoft dropped 38 cents to $70.63.

"Everybody already assumes that (the Fed) is not going to raise interest rates," said Tony Cecin, head of trading at US Bancorp Piper Jaffray.

Analysts and investors hope the slew of data released during the last few months will convince the Fed that the economy is slowing down and that interest rates should remain unchanged. Higher interest rates increase the cost of borrowing money and typically drive down stock markets.

Yet, some economists think the Fed's war against inflation is far from over. "They're not done yet," said Diane Swonk, chief economist at BankOne, who believes the Fed will probably increase rates in November.

"The problem with this kind of inflation is that it sneaks up on you," she said. "It's like water that's heating up from cool to tepid, by the time it reaches boiling and scorches everyone, it's too late."

The CNET tech index gained 10.75 to close at 3,230.94. Losers and winners finished about even, with 47 of the 97 stocks in the index rising, 47 falling and three remaining unchanged.

Of the 18 sectors tracked by CNET Investor, network-equipment companies posted the sharpest gains, rising 2 percent. Semiconductor-equipment makers were the day's largest losers, slipping 1 percent.

Clearnet Communications was the biggest percentage gainer on the Nasdaq. The shares of the wireless service provider jumped $13, or 42 percent, to $44. Volume topped 5.9 million shares, more than 28 times the stock's average daily volume.

Telus, Canada's No. 2 phone company, will buy Clearnet for $4.48 billion (C$6.6 billion) to extend the reach of its wireless network.

Evoke Communications and MircoStrategy also posted large gains. Evoke, a Net-communication service provider, rose $2.06, or about 41 percent, to $7.09 on a volume of 10.6 million shares.

Software developer MicroStrategy increased $8.56, or nearly 41 percent, to $29.56 on a volume of 19.1 million shares, nearly six times more than the stock's average daily volume of 3.4 million shares.

MicroStrategy, whose stock tumbled this year after it revised two years of sales figures, announced that IBM will sell its customer-service software.

Among members of the CNET tech index, data-transmission company Level 3 Communications rose $4.50, or nearly 8 percent, to $64.50.

Network Associates also rose 69 cents, or 3 percent, to $20.44. First Albany reiterated its "buy" rating on the e-commerce software maker.

Wireless-application software maker TeleCommunications Systems fell $3.13, or 12 percent, to $22.13. Integrated Circuit Systems, which manufactures silicon timing devices, also fell $3.56, or almost 14 percent, to $22.19.

VoiceStream Wireless fell $9.75, or about 8 percent, to $113.63.

The Philadelphia semiconductor index fell 23.29, or 2 percent, to 1,111.53, led by chipmaker National Semiconductor, which lost $2.44 to close at $43.