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NEW YORK : Wall Street stocks fell on Monday as anxiety ran high a day ahead of a crucial Federal Reserve meeting to decide the course of US interest rates. The Dow Jones Industrial Average dropped 39.10 points (0.29 percent) to close at 13,403.42 and the tech-heavy Nasdaq shed 20.52 points (0.79 percent) to 2,581.66.
The broad-market Standard & Poor's 500 index declined 7.60 points (0.51 percent) to 1,476.65.
The market action came after gains of better than two percent for the broad market last week, with many investors banking on a rate cut at Tuesday's Federal Open Market Committee (FOMC) meeting to ease stress in the housing and credit markets.
Analysts are sharply divided on the Fed's course. Many say the Fed needs to cut its base rate of 5.25 percent by 25 or 50 basis points, but others say a reduction would fuel inflation and bring back easy money conditions that have led to the real estate boom-and-bust cycle.
"Expectations for a Fed bailout are running high," said Bernie Schaeffer at Schaeffer's Investment Research, who warns that the market may be disappointed by the announcement from the Fed, led by chairman Ben Bernanke.
"It is becoming increasingly clear to me that a minimum of a 50-point cut is needed and that Bernanke is not likely to deliver on it," he said.
Gregory Drahuschak at Janney Montgomery Scott urged caution ahead of the decision.
"Making major decisions before knowing what the Fed will do could be a mistake," he said.
"The evidence suggests that an interest-rate reduction cycle may not be the elixir that cures all ills, but it does make the market feel a lot better ... This week's big hope is that the Fed's prescription for the economy is not another dose of inflation fighting instead of lower credit costs."
Other factors affecting trade included another record for crude oil futures, which topped 80 dollars a barrel in New York, and the crisis at British mortgage lender Northern Rock, in which the Bank of England pledged to protect all savings as customers queued for a third straight day to withdraw cash.
Bonds were mixed. The yield on the 10-year US Treasury bond rose to 4.470 percent from 4.462 percent on Friday and that on the 30-year bond eased to 4.714 percent from 4.724 percent. Bond yields and prices move in opposite directions.
Among stocks being watched, Microsoft fell 1.08 percent to 28.73 dollars as the European Court of First Instance, the European Union's second-highest tribunal, upheld most of the European Commission's antitrust ruling against the US company.
The court affirmed the record 497-million-euro (690-million-dollar) fine on the world's biggest software firm and the order for Microsoft to sell a version of Windows PC without a media player already bundled in.
General Motors advanced 2.95 percent to 35.23 dollars as the market continued to bet on a cost-savings deal between the US auto giant and the United Auto Workers Union after the expiration of a contract at the weekend.
Shares in the Nasdaq Stock Market fell 1.43 percent to 34.41 on reports it was close to a deal to sell its nearly 30 percent stake in the London Stock Exchange to Qatar's investment arm. - AFP/de
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