Stocks & Bonds: Rally Fades To Small Loss, Despite The Fed’s Rate Cut

Wall Street gave up sharp gains and closed lower on Wednesday after the Federal Reserve Board cut interest rates by a quarter of a percentage point but left investors guessing about its next move.

The Dow Jones industrial average, which momentarily edged above 13,000 for the first time since early January, ended the session with a modest loss.

“The market had wanted to hear tougher talk on inflation, and some sort of talk that the easing has been adequate for a while, for the foreseeable future,” said Scott Wren, equity strategist for Wachovia Securities.

The Dow Jones industrial average fell 11.81, or 0.09 percent, to 12,820.13, after trading up 178 points shortly after the Fed’s announcement.

Broader stock indicators also gave up steep gains and closed down. The Standard & Poor’s 500-stock index fell 5.35, or 0.38 percent, to 1,385.59, and the Nasdaq composite index fell 13.30, or 0.55 percent, to 2,412.80.

The Russell 2000 index of smaller companies fell 2.75, or 0.38 percent, to 716.18.

The dollar dropped against most other major currencies, while gold prices turned higher.

Crude oil for June delivery fell $2.17, to settle at $113.46 a barrel, on the New York Mercantile Exchange, after falling more than $3 a barrel on Tuesday.

The stock market rallied in the hours before the Fed decision because of stronger-than-expected economic and corporate reports — a trend in recent weeks that has helped the three major indexes post their first monthly gains after five consecutive months of losses.

The Dow climbed 4.54 percent for the month of April; the S.& P. rose 4.75 percent; and the Nasdaq jumped 5.9 percent. However, the Dow is down 3.35 percent for the year, while the S.& P. shows a loss of 5.64 percent for the year, and the Nasdaq is off 9.03 percent.

The Commerce Department estimated on Wednesday that the gross domestic product rose at a modest seasonally adjusted annual rate of 0.6 percent during the first quarter, while the Chicago purchasing managers’ index showed another month of contraction in Midwest manufacturing.

Many economists had forecast a lower rise in the gross domestic product in the first quarter, however — some had even predicted a contraction — and on average, they had expected a reading of 48.0 for the April purchasing managers’ index instead of the reported 48.2.

Another report that beat lowered expectations came from General Motors, whose quarterly loss of $3.3 billion because of a supplier strike and weak American sales was milder than Wall Street had predicted. Shares of the automaker, a Dow component, jumped $2, or 9.4 percent, to $23.20.

Procter & Gamble, another Dow component, said price increases and cost controls had helped offset higher commodity costs, pushing its third-quarter profit up 8 percent. P.& G. lifted its full-year outlook, and its shares rose $1.15, to $67.05.

The software maker SAP said that its profit slipped in the first quarter because of its takeover of another software company, Business Objects, and the weaker dollar. SAP shares fell $2.22, or 4.2 percent, to $50.23.

The benchmark 10-year Treasury note rose 23/32, to 98 4/32, after the Fed’s decision. Its yield, which moves opposite its price, fell to 3.73 percent from 3.82 percent.

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