U.S. Stocks Move Cautiously Ahead As FOMC Meets

NEW YORK (MarketWatch) -- U.S. stocks on Tuesday pulled tentatively higher for a second day, with technology weighing on the broader market, as investors anticipated another interest-rate cut on Wednesday from the Federal Open Market Committee.

"Investors have been buying shares on the view that, with the help from lower rates, the U.S. economy can avert recession and corporate profits can rebound during the second half of 2008 -- there is now a lot riding on the Fed and its announcement tomorrow," said Frederic Ruffy, analyst, Optionetics.

The Dow Jones Industrial Average was up 36.9 points, or 0.3%, to 12,420.8, with 17 of its 30 components ahead, with telecommunications stocks among the blue chips posting strong gains.

AT&T Inc. was up 3.1%, and Verizon Communications rose 1%.

The S&P 500 gained 1.94 points, 1.1%, to 1,355.90, while the Nasdaq Composite slipped 4.57 points, or 0.2%, to 2,345.34.

On the New York Mercantile Exchange, gold futures edged lower, with the contract for February delivery off $2.6 at $924.5 an ounce after surging earlier to another record high of $933.30 an ounce in electronic trading. .

Elsewhere on the Nymex, crude futures rose above $91 a barrel, with the contract for March delivery recently off 15 cents at $90.84 a barrel. .

In currencies trade, the dollar was mixed, with the dollar index, which tracks the performance of the greenback against six other major currencies, at 75.573, compared to 75.590 in late U.S. trading Monday. .

Volume on the New York Stock Exchange topped 836 million, and advancing stocks pulled ahead of declining issues, more than 3 to 2. On the Nasdaq, nearly 1.3 billion shares traded, and advancing stocks ran ahead of those declining 5 to 4.

Fed factor

On Monday, stocks advanced after a bleak report on new-home sales spurred speculation that the Federal Reserve would trim its rate target by at least 25 basis points in the wake of last week's emergency 75 basis point cut.

The FOMC begins its deliberations Tuesday afternoon, with a decision expected Wednesday afternoon.

"We are looking for 25 basis points on both the discount and Fed fund rates, based on some sense of stability in stocks, as well as credit conditions," said Tom DiGaloma, head of Treasury trading at Jefferies & Co. Inc.

Already ahead, stock futures ran higher after the Commerce Department reported orders for durable goods rose 5.2% in December, far exceeding economists' expectations of a 2.2% gain. .

Other Tuesday data included the Conference Board's consumer confidence index, which fell in January, giving up much of the previous month's gains. .

And, another index, released by Standard & Poor's, found the decline in U.S. home values accelerating in November. .

Fed interest-rate cuts might prevent a recession, but the spiral down for home prices is likely not over, said Yale economics professor Robert Shiller. .

Tuesday's more active stocks included EMC Corp. , which posted a 35% gain in fourth-quarter net income but also said revenue for its VMware Inc. subsidiary fell short of expectations. EMC stocks were off 6.6%. .

Also under pressure, Sherwin-Williams Co. fell 2.7% after the paint maker offered a slight increase in fourth-quarter profit but warned first-quarter results would likely fall short of Wall Street targets. .

Countrywide Financial Corp. , in a deal to be acquired by Bank of America Corp. , reported fourth-quarter losses of $422 million. Its stock was up 4.2%.

American Express Co. shares were unchanged after it reported a 10% decline in fourth-quarter net income after Monday's close, with the credit-card company setting aside more money to cover loan losses. .

Overseas, most Asian markets bounced back in the wake of Monday's gains on Wall Street. .

In Europe, shares traded on a pace to score their third rise in the past six sessions. .

By Kate Gibson