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Stocks closed mixed as investors played it cautious ahead of an expected interest-rate hike from the Federal Reserve on Tuesday, at the end of its two-day meeting. Modest strength in the technology sector allowed the Nasdaq Composite Index to end a bit higher.

Today, the Dow Jones industrial average closed down 29.86 or 0.3% to 11,250.11, the broader Standard & Poor’s 500 index closed down 1.34 or 0.1% to 1,301.61, and the tech-heavy Nasdaq composite index closed up 2.76 or 0.1% to 2,315.58.

Market breadth was mixed. On the New York Stock Exchange, losers beat winners nine to seven on volume of 1.37 billion shares. On the Nasdaq, decliners and advancers were roughly equal balanced on volume of 1.88 billion shares.

Fed policy-makers are meeting Monday and Tuesday to discuss rates, with a decision due Tuesday afternoon. The central bank is expected to boost its target for the short-term interest rate to 4.75%. While the market is expecting this raise, investors will be focused on what the bankers imply about future rate hikes in the closely watched statement. It is opined that the statement will be fairly ambivalent in terms of future rate hikes, so as to allow them to look at and evaluate the data between now and the next meeting in May.

Looking at the immediate future, the most important catalyst for equities is likely to be first-quarter earnings season and whether companies will be able to maintain margins at near record levels. Many investors are skeptical that they can be maintained at this level, particularly with productivity slowing down. This is one factor that may guide the path the markets take.

Several mining companies rallied after Citigroup became more upbeat on industrial metals, upgrading key players such as Inco, Phelps Dodge Corp, Alcan and Rio Tinto. The broker abandoned its longstanding bearish stance on copper and nickel. It opines that the sector will benefit from rising economic growth and structurally tight inventories, with sluggish new capacity additions and recurring operating outages also lending support to prices. This lead Alcoa to close up $0.50 or 2% to $30.33, Alcan closed up $0.46 to $45.76, Phelps Dodge closed up $1.47 to $76.61, and Newmont Mining closed up $1.06 to $50.52.

Lucent Technologies Inc. closed up $0.02 or 1% to $3.08, on news that Alcatel’s board will meet this week to consider the joint merger of the two telecoms. U.S. listed shares of Alcatel finished down 1.7% at $15.43.

With Goldman Sachs becoming bullish on Intel Corp, its shares advanced 14 cents to close at $19.73. The analysts believe that Intel’s new desktop central processing unit will help it stop rival Advanced Micro Devices Inc. market-share gains in the second half of 2006.

In the beginning of this crucial week for General Motors Corp. its shares climbed 1.2% to $22.93. The company is poised to file its delayed annual report, and its board is expected to meet to discuss the potential sale of its GMAC financing arm. Additionally, GM will reportedly begin laying off part of its white-collar workforce on Tuesday as part of its aim to reduce its salaried workers by 7% this year, or at least by 2,500 positions.

Stock of Walgreen Co. rose 1.4% to $45.02. The drugstore operator has reported an increase in second-quarter profit, as solid sales of Christmas and Valentine’s Day merchandise helped partially offset a mild flu season, which damaged pharmacy sales. However, sales came in slightly shy of analyst expectations.

U.S. light crude oil for May delivery fell 10 cents to settle at $64.16 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter