U.S. Stocks' Advance Fades Ahead Of Fed Decision

NEW YORK (MarketWatch) -- Stocks headed lower Tuesday amid weakness in the financial sector ahead of the Federal Reserve's interest-rate decision, with only the Nasdaq clinging to gains on upbeat technology news, including Texas Instruments Inc.'s outlook.

"All eyes [are] on today's FOMC [Federal Open Market Committee] decision," said Tom DiGaloma, head of U.S. Treasury trading at Jefferies & Co.

The Fed will cut rates Tuesday afternoon, with the only question being whether it will trim by a quarter point or a half point, said Gene Peroni, senior vice president at Advisors Asset management. .

After posting modest gains earlier, the Dow Jones Industrial Average was recently down 13.2 points at 13,713.8.

Twenty-two of the blue-chip index's 30 components were trading in the red, led by financial shares: American Express Co. fell 2%, while JP Morgan Chase Co. was down 1.2% and Citigroup Inc. declined 0.8%.

The S&P 500 fell 1.44 points to 1,514.52, while the Nasdaq Composite climbed 4.64 points to 2,723.59.

On the New York Mercantile Exchange, crude-oil futures rose $1.86 to $89.73 a barrel. . Elsewhere on the NYME, gold futures gained $1.7 cents to $815.2 an ounce. .

On the New York Stock Exchange, 454 million shares traded hands while on the Nasdaq, 719 million shares were exchanged. On the NYSE, declining stocks outpaced those advancing about 3 to 1, while decliners moved ahead of advancers 7 to 6 on the Nasdaq.

Fed moves

Economists are looking for a rate cut of at least a quarter of a percentage point, if not half a point, when the Fed announces its decision Tuesday at 2:15 p.m. Eastern. Also important will be the Fed's wording, with the central bank expected to leave room for further easing. .

Shortly after the opening bell, the Commerce Department reported U.S. wholesalers worked down their inventories in October, with inventory totals falling to their lowest level yet in relation to sales. .

AT&T was up 6.9% after the telecommunications giant said it is increasing its dividend by 13% and buying back 400 million shares.

Blue-chip Boeing Co. said late Monday it was increasing its quarterly dividend payment by 14% to 40 cents a share.

Texas Instruments shares jumped 3% after the chipmaker lifted its forecast, citing strength in demand for chips to power notebooks offset weakness in wireless.

Shares of H&R Block Inc. fell 1% after the nation's largest tax preparer forecast a wider second-quarter loss as it winds down its troubled subprime-mortgage operations.

Washington Mutual shares fell 7.9% after the lender said it would exit the subprime lending business and cut 3,150 jobs. It also plans to slash its dividend and sell $2.5 billion in convertible preferred stocks.

Kroger Co. shares slid 5.3% after the largest U.S. supermarket operator reported an 18% hike in third-quarter profit, topping Wall Street estimates, but offered a forecast that fell below consensus projections. .

Shares of Starbucks Corp. also fell, recently down 2.6%, after Goldman Sachs cut its rating to neutral from buy, citing slower same-store sales and declining new store productivity. .

Overseas

European shares edged lower, paced by a decline in the property sector as investors fretted about tightening credit market conditions, even amid expectations of an imminent rate cut out of the United States. .

Asian stocks rose, with markets in Hong Kong and Japan tilting higher as investors bought financials on speculation the Federal Reserve would cut rates again. .

By Kate Gibson