US stocks: Market ends lower as rates and oil weigh

NEW YORK - US stocks slipped on Monday, with interest-rate sensitive shares such as banks falling ahead of an expected rate hike on Tuesday, although a number of tech mergers limited losses on the Nasdaq.

Both the Dow average and the Standard & Poor's 500 closed at their lowest levels in about seven weeks. The Nasdaq inched down to a fresh closing low for the year, its lowest since November.

Among falling stocks were financial services companies, typically sensitive to rising interest rates. Citigroup Inc. fell 2.3 per cent, or US$1.09, to US$45.76 and Bank of America Corp. shed 1.4 per cent, or 64 cents, to US$44.30.

The Federal Open Market Committee meets on Tuesday and a quarter-point hike to 2.75 per cent is expected. More important will be whether the Fed continues to assert that policy can be tightened at a "measured" pace. There has been some speculation that the "measured" word might be dropped.

The Dow Jones industrial average was down 64.28 points, or 0.60 per cent, to close at at 10,565.39. The Standard & Poor's 500 Index was down 5.87 points, or 0.49 per cent, to end at 1,183.78. The Nasdaq Composite Index was down just 0.28 of a point, or 0.01 per cent, to finish at 2,007.51.

Stocks, however, trimmed some earlier session losses.

"I think we have pretty cautious trade ahead of the FOMC, " said Paul Cherney, chief market analyst at Standard & Poor's.

"The market got worried about higher crude prices and the implications for inflation. "

Cherney thought there could be a relief rebound after the Fed's decision on Tuesday.

"If they remove the 'measured' pace, the knee-jerk reaction could be down, but then all the bears have to scratch their heads and think 'what's the worst bit of news we can get after this?'. Then I think we'll get a rebound in prices. "

The market was looking ahead to inflation data, with the Producer Price Index due on Tuesday and the Consumer Price Index set for release on Wednesday.

"People are fearful of higher rates," said Ted Oberhaus, manager of equity trading at Lord Abbett & Co.

Oil was also a concern, Oberhaus said. "It's going to be very difficult for equities to mount any kind of substantial rally with oil sitting at US$57 a barrel. "

US crude futures for April delivery ended slightly lower, trimming earlier gains that took them above the US$57 mark. April delivery crude, which expired at the close, settled down 10 cents at US$56.62 a barrel.

While that helped stocks pare their losses by easing worries about higher corporate costs and slack consumer spending, energy stocks declined. Exxon Mobil Corp. fell 0.8 per cent, or 51 cents, to US$62.14.

But Carnival Corp., the world's biggest cruise operator, fell nearly 6 per cent, or US$3.24, to US$51.59 after it said higher fuel costs would hurt results for the rest of this year.

Troubled automaker General Motors Corp. rose 3.7 per cent, or US$1.07, to US$29.69. The Wall Street Journal reported that GM planned to slash its North American white-collar work force.

Technology companies were helped by a spate of deals, which one trader said boosted hopes of further consolidation.

Web-search service Ask Jeeves Inc. jumped 18 per cent, or US$4.43, to US$28.67 after IAC/InterActiveCorp, the internet conglomerate run by media mogul Barry Diller, said it plans to buy the company. IAC fell 3 per cent, or 66 cents, to US$21.63.

Meanwhile, SunGard Data Systems Inc., a financial services technology company, surged 24.5 per cent, or US$6.12, to US$31.07 after it said it is in talks to sell the company to an unnamed buyer.

Among decliners, American International Group Inc. slid 3 per cent, or US$1.86, to US$57.90, amid concerns about government probes into the insurance giant and the forced departure last week of Maurice Greenberg as chief executive.

Altria Group Inc. fell 2.2 per cent, or US$1.44, to US$63.28 after the US Supreme Court rejected an appeal by Altria's Philip Morris USA, a cigarette maker, in a California case involving US$9 million in punitive damages awarded to a former longtime smoker who has lung cancer.

Trading was active, with 1.45 billion shares changing hands on the New York Stock Exchange, about the same as the 1.46 billion daily average for last year. About 1.63 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year. Decliners outnumbered advancers on the New York Stock Exchange by about 12 to 5 and by about 8 to 7 on Nasdaq.

- REUTERS