us stocks drop despite fed s pause cisco up late

Updates Cisco's gain after the bell in new paragraph 9, adds
latest Nasdaq volume figure)

By Ellis Mnyandu

NEW YORK, Aug 8 (Reuters) - U.S. stocks fell on Tuesday as
investors worried that slowing economic growth would hurt
corporate profits despite a pause in the Federal Reserve's
two-year campaign of raising interest rates.

As expected, the Fed's policy-making committee left the
benchmark fed funds rate unchanged at 5.25 percent, and said
economic growth had moderated "from its quite strong pace
earlier this year, partly reflecting a gradual cooling of the
housing market and the lagged effects of increases in interest
rates and energy prices."

Traders said the Fed's statement cued investors to sell
shares of companies whose fortunes are closely tied to
economic cycles, including heavy equipment maker Caterpillar
Inc. and industrial conglomerate United Technologies
Corp. . They were among the Dow's biggest losers.

But shares of defensive companies, whose products
consumers can't do without even in an economic downturn,
rose.

Gains in the shares of Altria Group Inc. , parent of
Marlboro cigarette maker Philip Morris USA, and Procter &
Gamble Co. , the maker of Crest toothpaste, limited the
Dow's decline.

"Once the dust settled, the Fed is (saying) their forecast
is not the best one for the equity market," said Joe Liro,
market strategist for Stone & McCarthy Research Associates, in
Princeton, N.J.

With the "housing sector weakening, the consumer sector a
little soft and even the investment side looking a little bit
dicey -- the three cornerstones of private-sector growth are
looking a bit tepid," he added.

The Dow Jones industrial average <.DJI> fell 45.79 points,
or 0.41 percent, to end at 11,173.59. The Standard & Poor's
500 Index <.SPX> declined 4.29 points, or 0.34 percent, to
finish at 1,271.48. The Nasdaq Composite Index <.IXIC> dropped
11.65 points, or 0.56 percent, to close at 2,060.85.

After the closing bell, shares of Cisco Systems Inc.
jumped almost 10 percent to $19.01 after the network
equipment maker reported stronger-than-expected quarterly
earnings and revenue. Cisco's stock closed on Nasdaq at
$17.29, down 0.7 percent, or 11 cents, before the results were
released. For more details, see [ID:nN08190897]

Major indexes had briefly extended gains following the
Fed's decision, but soon reversed course as growth concerns
resurfaced, adding to worries fueled by Friday's
weaker-than-expected July jobs data.



BOEING LOSES ALTITUDE, ALTRIA CLIMBS

Caterpillar shares dropped 2.2 percent, or $1.58, to
$71.60 on the New York Stock Exchange, and ranked as the
second-biggest drag on the Dow. The heaviest weight on the
blue-chip Dow average was U.S. defense contractor and jet
manufacturer Boeing Co. , whose stock fell 2.01 percent,
or $1.60, to $78.15.

United Technologies shares slid 1.9 percent, or $1.21, to
$61.88 on the NYSE. The stock was the third-biggest drag on
the Dow, followed by diversified manufacturer 3M Co. ,
whose shares fell 0.6 percent, or 44 cents, to $68.56.

Shares of General Electric Co. , another economic
bellwether, lost 1.1 percent, or 35 cents, to $32.34. The
stock was the top drag on the S&P 500.

On Nasdaq, shares of Apple Computer Inc. , the
maker of the iPod digital music player, led the decline,
falling 3.6 percent, or $2.43, to $64.78.

But shares of Altria rose 1.5 percent, or $1.20, to $80.30
on the NYSE. Shares of P&G, the consumer products maker,
gained 0.5 percent, or 27 cents, to $59.67 in NYSE trading.

Volume on the New York Stock Exchange totaled 1.62 billion
shares, slightly above last year's daily average of 1.61
billion. On the Nasdaq, about 1.96 billion shares changed
hands, exceeding last year's daily average of 1.80 billion
shares.

Declining stocks outnumbered advancing ones on the NYSE by
a ratio of about 3 to 2, while on the Nasdaq, about two stocks
fell for every one that rose.
(Additional reporting by Chris Sanders)