Blue Chips Fall Moderately After Fed's Action

NEW YORK – Blue chips ended mostly lower Wednesday after the Federal Reserve lowered interest rates for the sixth time this year.

The blue-chip Dow Jones industrial average ended the day with a loss of 37.30 points at 10,435.18. The technology-dominated Nasdaq Composite index rose 10.11 points to 2,074.73, while the broader Standard & Poor's 500 index fell 5.69 points to 1,211.07. Before the Fed news, the major indexes were higher.

The central bank lowered its bellwether federal funds rate, charged for overnight lending between banks, by a quarter percentage point to 3.75 percent and said it is prepared to cut rates further.

Wall Street had widely expected the U.S. central bank to deliver its sixth interest-rate cut so far this year, although some investors had been hoping for a heftier half-percentage point cut to jump-start corporate profits and the stock market.

``I think the market is a little disappointed, but a quarter of a point is winning the derby anyway -- the consensus was leaning that way,'' said Milton Ezrati, senior economic strategist at Lord Abbett & Co. ``But this shows the Fed is not as afraid as it might have been about the economy. It leaves the Fed some dry powder for another cut should it become necessary.''

The Fed's latest rate-cut was more modest that the five prior cuts it has engineered since January, but the slower pace of easing may indicate the condition of the U.S. economy is not dire and calmed fears that such rapid reductions in rates would overstimulate the economy and ignite inflation, analysts said.

Worries are surfacing that even another large drop in borrowing costs may not give the market a lasting boost. Investors, hit by profit warnings as the second-quarter draws to close, are hungry for signs that corporate profits will rebound soon and drive the stock market higher.

Among active issues, Palm Inc. jumped 83 cents, or about 16 percent, to $6.02. The No. 1 maker of handheld computers posted grim quarterly results compared to its year-earlier performance, bruised by slackening demand, oversupply and discounted prices. But Palm said it expects to turn its situation around by early fiscal 2002.

Retailer Target fell $1.47 to $35.26, while banker J.P. Morgan Chase stumbled 66 cents to $44.02.

Among Wednesday's biggest losers was CVS, which plunged $7.59, or 17 percent, to $36.51. The nation's second-largest drugstore operator warned that its earnings for the second quarter and for the year will be lower than expected because weak sales.

But most of the market's gains and losses were more moderate.

Lucent slipped 13 cents to $5.87 after The Wall Street Journal reported that the company might lay off an additional 10,000 workers because of continued restructuring.

General Mills rose 50 cents to $42.80 after the maker of Wheaties, Cheerios and Chex reported earnings that met analysts' expectations.

Smaller stocks fared better Wednesday as the Russell 2000 index rose 4.76 to 495.58. Analysts say smaller companies benefit more from lower interest rates, because they borrow more money and at higher costs.

Advancing issues outnumbered decliners more than 3 to 2 on the New York Stock Exchange, where volume was 1.14 billion shares, compared with 1.19 billion on Tuesday.

Overseas markets were mixed. Japan's Nikkei stock ended Wednesday down 1.15 percent. In Europe, Germany's DAX index slipped 0.3 percent, Britain's FT-SE 100 rose 0.9 percent, and France's CAC-40 fell 0.7 percent.

-- Reuters and the Associated Press contributed to this report.