U.S. Stocks Open Mixed Ahead Of Fed

NEW YORK (MarketWatch) -- U.S. stocks opened mixed Thursday, with investors cautious after a key reading on inflation was revised upwards, while crude oil neared $70 a barrel, ahead of the Federal Reserve decision on interest rates.

The Dow Jones Industrial Average was down 13 points at 13,415, as 19 of its 30 components traded lower.

Among blue chips, General Motors Corp. gained 1.7% after news that it would sell its Allison Transmission business for $5.6 billion to Carlyle Group and Onex Corp. And Intel Corp. rose 1.5% after Lehman Brothers upgraded the stock, predicting that its second-quarter sales will reach the top end of forecasts.

The S&P 500 dropped 0.6 points to 1,505, while the Nasdaq Composite advanced 2.7 points to 2,608. Intel was amongst the most heavily traded stocks on Nasdaq.

Trading volumes showed 89 million shares exchanging hands on the New York Stock Exchange and 129 million trading on the Nasdaq stock exchange. Advancing issues topped decliners by 16 to 11 on the NYSE, while decliners topped gainers by 12 to 11 on Nasdaq.

Stocks rallied Wednesday, reversing early weakness, as investors set aside recent jitters about the subprime mortgage market and hedge fund woes to focus on rebuilding their portfolios ahead of the end of the second quarter on Friday.

On Thursday the market's attention turned to the Fed decision, due at 2.15 p.m. Eastern.

"The [Fed's] statement is likely to be a repeat of the previous one, with inflation still likely to be the main concern of the fed," said Peter Cardillo, chief U.S. economist at Avalon Partners.

Earlier, the final revision to first-quarter gross domestic product showed a slight upward revision in growth that still fell short of economists expectations. A key gauge of inflation in the GDP report was also revised higher.

First-quarter growth in gross domestic product was revised to 0.7% from 0.6% previously, but the pace was still the slowest in four years. Meanwhile, core consumer prices, which are closely monitored by the Fed, rose at a 2.4% annualized pace in the quarter, revised up from the 2.2% rate previously projected.

Stocks in motion

Monsanto Co. reported a sharp increase in third-quarter earnings to $570 million or $1.03 a share from $334 million, or 60 cents a share, citing a strong agricultural season. On an adjusted basis, earnings beat expectations. The stock rose 1% to $66.62 before the opening.

Credit card giant Capital One Financial Corp. will cut about 2,000 jobs as part of its efforts to reduce expenses by $700 million in the next two years. The share advanced 2.8% to $81 before the bell.

Bed Bath & Beyond late Wednesday lowered its earnings and sales forecast and said the overall retail environment is "challenging." The stock was off 4.5% at $35.86 before the bell.

Novellus Systems Inc. last was off 2.8% at $29.05 before the opening. The company expects second-quarter revenue and earnings at the low end of the guidance it has previously provided, as it anticipates weakening demand in the semiconductor equipment industry. It's cutting executive salaries for the rest of the year and planning shutdowns.

Other markets

Treasury prices gave up their gains, pushing yields lower, after the latest GDP revision hinted that inflation is stronger than was believed. Inflation puts pressure on the Fed to keep rates higher and eats into the value of bonds.

The 10-year Treasury note last was down 2/32 at 95-14/32 with a yield of 5.095%.

However, the report was positive for the dollar, whose proponents would like to see higher rates to increase the currency's attractiveness against its major rivals. The euro last trade at $1.3462, down from $1.3471 before the report, while the dollar stood at 123.03 yen, up from 122.88 before the news.

Commodities were trending higher in the early going, as crude continued to benefit rom news on Wednesday that showed a decline in inventories of gasoline.

The August crude futures contract last was up 0.7% at $69.49 a barrel, as the front-month gold contract gained 0.6% to $649 an ounce.

By Leslie Wines