By Kristina Peterson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks fell Tuesday ahead of the
release of minutes from the U.S. Federal Reserve's latest meeting,
as grocers and materials weighed on the market following
downgrades.
The Dow Jones Industrial Average (DJI) recently dropped 28
points, or 0.2%, to 11643, one day after closing at a 28-month
high. The Nasdaq Composite (RIXF) fell 0.9% to 2666. The Standard
& Poor's 500-stock index (SPX) lost 0.7% to 1264.
Traders said the market's moves will likely be hesitant until 2
p.m. EST, when the U.S. Federal Reserve releases the minutes from
its latest meeting.
Investors are hoping to see the Fed demonstrate continued
resolve to engineering a sustained recovery, said Charles Reinhard,
global strategist at Morgan Stanley Smith Barney. And they'll be
watching to see "if it plans to do so while also incrementally
increasing inflationary expectations," he said.
The economic environment has changed since the last Fed meeting,
now that the Bush-era tax cuts have been extended, Reinhard noted.
"Because we now have more stimulative fiscal policy," he said,
"that takes some of the pressure off monetary policy once the QE2
[quantitative easing] program is completed."
Still, the market crept lower as traders waited to get further
guidance from the central bank.
Materials weighed on the S&P 500 after UBS cut its
stock-investment ratings on two construction aggregate companies to
neutral from buy, noting the stocks' strong performance in the
fourth quarter even as the political appetite for road spending
grew more uncertain. Vulcan Materials (VMC) fell 5.8%, while Martin
Marietta Materials shed 6.6%.
Food retailers also lagged after Bank of Montreal downgraded
Safeway (SWY) , Vitamin Shoppe (VSI) , and Whole Foods (WFMI) to
"market perform" from "outperform," noting limited upside. Safeway
fell 3.9%, Vitamin Shoppe was off 5.9% and Whole Foods shed 4.1%.
BMO also reduced its estimates for Supervalu, noting the chain's
inability to drive traffic, and Kroger (KR) , saying the fiscal
year 2011 consensus could be too high given the challenging
environment. Supervalu tumbled 7.4%, while Kroger lost 2.1%.
Morgan Stanley also cut Safeway and Supervalu, to "underweight"
from "equal weight," noting Supervalu's strategy to reduce prices
will collide with inflationary food costs.
Meanwhile, the telecommunications sector gained, as shares of
Motorola Mobility Holdings (MMI) rose 9% and Motorola Solutions
(MSI) gained 0.4% as Motorola's long-awaited split into two
entities officially took place Tuesday. Motorola Mobility consists
of the company's consumer-focused smartphone and set-top box
business, while Motorola Solutions focuses on handheld
communication devices and public-safety radios.
The dollar strengthened against both the euro and the yen. The
euro reversed earlier gains to trade recently at $1.3308, down from
$1.3351 late Monday in New York.
The U.S. dollar index (DXY) , which tracks the currency against
a basket of others, rose 0.4%. Crude-oil prices tumbled below $89 a
barrel, while gold futures also declined. Demand for U.S. Treasurys
increased, pushing yield on the 10-year note down to 3.31%.
Among stocks in focus, U.S.-listed shares of BP (BP) rose 1.7%,
touching a six-month high following reports that compensation
payouts for the Gulf oil spill may be much lower than expected and
lingering rumors that the company is a takeover target.
Borders Group (BGP) plunged 11% after the troubled book
retailer's Counsel Thomas Carney and Chief Information Officer D.
Scott Laverty resigned. A unit of closely held Ingram Industries
said it would continue to supply books to Borders despite the
chain's difficult financial situation.
Drugstore chain Rite Aid gained 2% after its same-store sales
rose 0.6% from a year earlier in December, exceeding analysts'
expectations and marking the first monthly growth since May
2009.
In U.S. economic data on Tuesday, the Commerce Department
reported that U.S. factory goods orders unexpectedly rose 0.7% in
November. Economists surveyed by Dow Jones Newswires had forecast a
0.1% decline.