chemical imbalance in dow Stock losses mount; GM, DuPont hurt...

chemical imbalance in dow Stock losses mount; GM, DuPont hurt the Dow

Consumer confidence rises in June; existing-home sales fall

NEW YORK - U.S. stocks fell Tuesday, with weakness in the technology sector pacing the decline, but a pullback in shares of General Motors Corp. and DuPont also weighed heavily on the Dow Jones Industrial Average.

Trading action comes against a background of investor speculation on the outlook for interest rates as the Federal Reserve gears up for a two-day meeting on monetary policy starting Wednesday.

"Everyone's taking a wait and see approach on the Fed," said John Caldwell, investment strategist at McDonald Investments. "We've started to hear a little bit more talk about whether they would do fifty."
Throughout June, many investors have grown convinced that the Fed, under the leadership of Ben Bernanke, is fixated on combating inflation by raising rates and is somewhat indifferent to indications of economic slowing.
This has led some market players to forecast that the central bank will put in place a half-point increase in the overnight rate on Thursday. So far the Fed has limited itself to quarter-point increases; it has raised rates 16 times in a row since June 2004. The federal-funds rate currently stands at 5%.
"I don't think it's likely," said Caldwell, referring to the chances of a half-point rate hike. "The data doesn't support the Fed getting more aggressive now." He noted the Fed could have been more aggressive in the middle of last year when economic growth was much stronger than it is today, but it chose not to be.