Wall Street stocks drift higher on interest hike

US stocks drifted mostly higher yesterday amid concerns the Federal Reserve may raise interest rates next year as the market awaited a speech by Fed chairman Ben Bernanke.

After opening lower, the Dow Jones Industrial Average was up 22.37 points (0.22 per cent) at 10,411.27 at 1618 GMT.

The Nasdaq composite fell 0.88 point (0.04 per cent) to 2,193.47, while the broad-market Standard & Poor’s 500 index also was virtually flat, rising 0.6 point (0.06 per cent) to 1,106.67.

Friday’s better-than-expected jobs report drove the dollar higher and pressured equities amid growing expectations that the Fed will tighten its near-zero interest rate policy sooner than expected.



“Fears of an interest rate hike in 2010 are negatively affecting investor sentiment,” said Joseph Hargett of Schaeffer’s Investment Research.

Analysts said the market was on tenterhooks ahead of Bernanke’s speech at noon (1700 GMT) to the Economic Club of Washington on US monetary policy and interest rates, with little in the way of economic and company news to distract attention.

“Participants will be waiting to see if the Fed chairman has any new perspective on the interest rate outlook after the November employment report,” said Patrick O’Hare at Briefing.com.

Financials were under pressure after media reports said the US Treasury was projecting the 700-billion-dollar Troubled Asset Relief Program to support the troubled financial sector would cost 200 billion dollars less than expected.

“Although the TARP headline is encouraging, it has not moved the market needle all that much as participants are aware risk factors for the banks have not gone away with the unemployment rate at 10 percent, commercial real estate suffering, and potential bogeys like the Dubai World debt situation looming,” O’Hare said.

Citigroup rose 0.74 per cent to US$4.09. The Financial Times reported that Citi was trying to repay US$20 billion of TARP funds after Bank of America announced last week it was repaying all US$45 billion of its TARP debt.

Citi also received US$45 billion from the Treasury and the government took a 34 per cent stake as part of the bailout.

Kuwait Investment Authority, the emirate’s sovereign wealth fund, said Sunday it has sold its Citi stake for US$4.1 billion, making a profit of US$1.1 billion.

Among stocks in focus, heavy equipment maker Caterpillar slipped 0.90 per cent to US$57.78 and oil giant Exxon Mobil dipped 0.38 per cent to US$73.97.

Barrick Gold slid 2.28 per cent to US$41.71 and Newmont Mining lost 0.83 per cent at US$51.62, extending Friday’s declines amid falling gold futures prices.

Wal-Mart climbed 1.14 per cent to US$54.86. The world’s retail leader announced late Friday it would pay US$40 million to settle an employees’ class-action lawsuit in Massachusetts.

In the tech space, Intel rivals Nvidia soared 13.11 per cent to US$16.13 and AMD leapt 7.63 per cent to US$8.46 as investors reacted to a Wall Street Journal report that the world’s largest semiconductor was scrapping plans to launch a key graphics chip. Intel shed 0.34 per cent at US$20.39.

US stocks had eked out modest gains Friday, with the Dow up 0.22 per cent.

Bonds gained. The yield on the 10-year Treasury bond fell to 3.435 per cent from 3.483 per cent Friday and that on the 30-year bond dropped to 4.380 per cent from 4.413 per cent. Bond yields and prices move in opposite directions.- AFP