Interest rate raise causes falls on US equities

The New York equities markets started out on a positive note on Tuesday, but after the Federal Reserve raised interest rates by 25 basis points to 3.75 percent, the markets began to decline and the Dow Jones Industrial Average, the Nasdaq composite, and the S&P 500 all ended the day with losses.

The Dow dropped 0.7 percent to 10,481.52, the Nasdaq was down 0.7 percent to 2,131,33, and the S&P closed down by 0.8 percent to 1,221.34.

Rising energy costs sent US Steel down by 5.4 percent to $42.81 after the company warned that profits might suffer from not only high oil prices but also on lower shipments and prices in the third quarter.

Higher fuel costs along with lower freight demand also brought losses to Swift Transportation, which declined by 8.5 percent to $16.85 when it said it would not reach third-quarter earnings forecasts.

The rising cost of energy also was at least partly the reason Lehman Brothers gave for downgrading Coca-Cola, Pepsi Bottling Group, and PepsiAmericas, causing all three to post losses on the day. PepsiAmericas lost 4.1 percent to $23.25, Pepsi Bottling Group was down 3.4 percent to $27.09, and Coca-Cola Enterprises declined by 1.6 percent to $19.13.

Mattress manufacturer Tempur Pedic International lost 28.6 percent to $11.70 after it issued a negative earnings guidance that blamed consumer reluctance to buy expensive items. Cosmetics retailer Estee Lauder fell 9.9 percent to $36.48 on a downgrade from “overweight” to “neutral” by JP Morgan after the company reduced its second-half sales predictions.

Not everyone was down, though. Circuit City gained 5.9 percent to $16.43 on its report that third-quarter profits were higher than had been expected.

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