Stocks mixed as Wall Street awaits Fed meeting

AP Business WriterNEW YORK (AP) -- Caution asserted itself on Wall Street Monday as investors collected their wins from last week's advance but shied away from new commitments ahead of a Federal Reserve meeting.

Analysts said Wall Street, still unsure about the prognosis for earnings improvement, wanted to hear what the central bank would say Tuesday about the economy, and in turn, interest rates, before making any big moves. Volume was light in lackluster trading.

The Dow Jones industrial average closed down 29.48, or 0.3 percent, at 10,577.75, according to preliminary calculations.

Broader stock indicators were mixed. The technology-centered Nasdaq composite index rose 8.76, or 0.5 percent, to 1,877.06. The Standard & Poor's 500 index slipped 0.59, or 0.1 percent, to 1,165.57.

This week's Fed meeting is expected to provide some clue as to when interest rates will start climbing. The Fed, which cut rates 11 times last year to stimulate growth, is expected to begin boosting them later this year as signs increase that business is rebounding. Higher interest rates make it more expensive to borrow money, so raising them is one way to ensure that growth doesn't get out of hand and expose the economy to inflation.

"The market's going to be in a little bit of a holding atmosphere as we await the Fed meeting even though the outcome should be as expected, which is no interest rate increase" this time, said Barry Hyman, chief investment strategist at Ehrenkrantz King Nussbaum. "It could spook the market, though, if they shift their bias and indicate that an increase is coming."

In trading Monday, Hewlett-Packard advanced 20 cents to $19.25 ahead of a shareholder vote Tuesday on its plan to merge with Compaq, which was up 3 cents at $10.36. The vote is considered too close to call.

Qwest Communications International rose 33 cents to $9.01 on news it repaid $608 million of its $4 billion unsecured bank credit.

But Microsoft dropped 35 cents to $62.14 after nine states told a judge the software company should be forced to release the blueprints for its Internet browser to give competitors a fair chance. They made that contention at the start of a court proceeding that will determine whether Microsoft should face penalties in addition to its antitrust settlement with the federal government.

Blue chips also languished. Merck fell 96 cents to $58.79, while Boeing dropped 35 cents to $47.63.

Investors bid lower two brokerage firms expected to report earnings later this week. Goldman Sachs fell 80 cents to $89.20, while Lehman Brothers slipped 53 cents to $64.55.

Stocks have been rising all month, helped by a steady stream of good economic news and Wall Street's growing hopes that the recession that began last year is over. Still, the gains have slowed in recent sessions as investors try to figure out whether earnings growth will be strong enough to justify what have become in some cases expensive stock prices.

The arrival of first-quarter earnings season next month should help settle the issue, but until then, most analysts expect gains to be tentative -- with investors pausing periodically to take profits and reassess the market's health.

"I'm expecting the market to hang in there for now. But the big question going out further is how are the earnings are going to shape up?" said Robert Harrington, head of listed block trading at UBS Warburg. "It's hard to tell right now."

Advancing issues led decliners nearly 3 to 2 on the New York Stock Exchange. Volume came to 1.14 billion shares, compared with 1.48 billion Friday. Trading was unusually heavy Friday because of the expiration of stock futures and options.

The Russell 2000 index was up 3.68 at 502.80.

Overseas, Japan's Nikkei stock average fell 1.3 percent. In Europe, Germany's DAX index advanced nearly 0.5 percent, Britain's FT-SE 100 rose more than 0.1 percent, and France's CAC-40 climbed 0.8 percent.

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