Stocks Dip As Investors Await Ruling On Rates

NEW YORK - Wall Street fell moderately Monday as investors anxiously awaited the Federal Reserve's impending decision on interest rates.

The market is betting on a rate cut from the Fed when the central bank meets today, but investors are not completely sure what it will do and what it will say in its economic statement.

Also, with the major brokerages' third-quarter results yet to be released, investors are uncertain about how badly the summer's stock downturn, souring home loans, and credit squeeze hit the banking industry.

Adding to the uneasiness, Northern Rock PLC, Britain's fifth-largest mortgage lender, saw its stock plunge and customers withdraw billions of dollars after it issued a profit warning Friday and requested emergency funding from the Bank of England. That gave U.S. investors an added impetus to pare their stock holdings, particularly in the financial sector.

Talk from former Fed chairman Alan Greenspan of the possibility of a recession amid high inflationary pressures also elevated Wall Street's jitters, as did job cuts at Merrill Lynch & Co.'s First Franklin Financial Corp.

The Dow Jones industrial average fell 39.10, or 0.29 percent, to 13,403.42.

Broader stock indicators showed somewhat steeper losses. The Standard & Poor's 500 index fell 7.60, or 0.51 percent, to 1,476.65, and the Nasdaq composite index lost 20.52, or 0.79 percent, to 2,581.66. The Russell 2000 index, which tracks small company stocks, fell 7.68, or 0.98 percent, to 775.81.

Bonds rose modestly, pushing the yield on the 10-year Treasury note down to 4.47 percent from 4.48 percent late Friday.

Staying On Sidelines

Volume on the New York Stock Exchange was among the lightest of any day this year, indicating that many market participants were staying on the sidelines ahead of the Fed's decision. Consolidated volume totaled 2.47 billion shares, compared with 2.65 billion traded Friday.

Declining issues outnumbered advancers by a more than 2-1 ratio on the exchange.

Stocks saw sizable gains last week, largely because of high expectations of a rate cut. The Dow ended up 2.51 percent; Standard & Poor's 500 index rose 2.11 percent; the Nasdaq composite index rose 1.42 percent. The Dow is 4 percent below its all-time high of 14,000.41, reached in July before fears escalated about bad home loans and excessive leveraged debt.

The prospect of a recession has kept markets volatile.

Greenspan said in an interview with NBC before the markets opened Monday that the risk of a recession is higher than it was at the beginning of the year but not by much.

Meanwhile, U.S. Treasury Secretary Henry Paulson said in Paris that regulators should not rush to impose new rules on the market because of the recent tightening in credit.

'There's tremendous growth going on in many parts of our world economy, and that's driving a lot of business here in the U.S.,' said Rob Lutts, chief investment officer of Cabot Money Management, noting that markets are focused on the U.S. housing market.

The dollar was mixed against other major currencies, and gold jumped.

Oil Prices Hit Record

Crude oil prices rose $1.47 to settle at a record $80.57 per barrel on the New York Mercantile Exchange. Crude closed over $80 for the first time last week. Oil futures also set a trading record Monday, moving as high as $80.70.

In Europe, Britain's FTSE 100 fell 1.69 percent, Germany's DAX index fell 0.24 percent, and France's CAC-40 fell 1.80 percent.

This week, major investment banks - Bear Stearns Cos., Lehman Bros., Morgan Stanley, Goldman Sachs Group - release their fiscal third-quarter results. Monday, Bear Stearns fell $1.81, to $115.38; Lehman Brothers fell 88 cents, to $58.62; Morgan Stanley fell $1.20, to $64.91; and Goldman fell $2.98, to $187.61. Merrill Lynch fell $1.80, or 2.4 percent, to $72.85 after saying it was eliminating jobs.