Stocks cut gains, Nasdaq turns negative

NEW YORK (Reuters) - Stocks rose on Tuesday and the Dow industrials climb to the highest in nearly five years on expectations the Federal Reserve will offer more stimulus to prop up a sagging economic recovery.

The Nasdaq, however, erased gains as shares of Apple dropped.

In recent weeks the S&P 500 and Nasdaq have hovered near recent multi-year highs on hopes for monetary stimulus by central banks around the world.

Energy, industrial and financial firms led Wall Street's advance, but volume was light. Contributing to gains in the Dow, shares of International Business Machines Corp climbed 1.19 percent to $203.36. Caterpillar rose 1.94 percent to $88.79.

But Apple's shares slipped 0.53 percent to $659.21.

The Fed is expected to make a policy announcement on Thursday, with economists forecasting a 60 percent chance the U.S. central bank will announce another round of quantitative easing at the end of its two-day meeting. Disappointing U.S. August jobs data released last Friday bolstered that view.

"It's more likely that they will do something," said Michael Farr, president of Farr, Miller & Washington in Washington, D.C., which has over $800 million in assets under management.

"The one thing this market has proved over the last three, four, or five years is that you don't fight the Fed. The fundamentals of the economy clearly don't matter."

The Dow Jones industrial average <.dji> gained 74.26 points, or 0.56 percent, to 13,328.55. The Standard & Poor's 500 Index <.spx> gained 4.55 points, or 0.32 percent, to 1,433.63. The Nasdaq Composite Index <.ixic> dropped 0.31 point, or 0.01 percent, to 3,103.71.

Some investors have concerns, however, that a lot of the good news has already been priced in, exposing markets to a decline should the Fed disappoint. In addition, action by the Fed could distort market prices and would not be beneficial.

Expectations Germany's Constitutional Court would approve on Wednesday the European Stability Mechanism -- the euro zone's new bailout fund -- also boosted sentiment. But legal experts believe it will impose tough conditions limiting Berlin's flexibility on future rescues, which could be seen as a negative by markets.

Another event which could cause turbulence in markets is a Dutch general election on Wednesday, with voters divided between bailouts for troubled euro zone economies and austerity measures.

Investors are keeping an eye on big-cap bellwether technology names because of their role in global business spending. Techs fell on Monday following Intel's warning last week that reduced demand will hurt its third-quarter results. Shares were up 1 percent Tuesday.

McDonald's Corp advanced 0.19 percent to $91.48 after the fast-food restaurant chain reported a 3.7 percent rise in August sales at established restaurants around the world, slightly below expectations of a 3.9 percent increase.

Package delivery companies FedEx Corp and United Parcel Service Inc have received approval to provide express-package services in some cities of China on their own, the country's State Postal Bureau (SPB) said on its website last week. FedEx gained 1.17 percent to $88.99 and UPS rose 0.90 percent to $73.71.

Knight Capital Group Inc said it has hired IBM to look into the August 1 trading glitch that cost the trading firm $440.

Zynga Inc's chief marketing officer resigned on Monday, becoming the latest senior executive to depart the struggling social games company behind popular Facebook Inc games such as Farmville. Zynga shares dropped 1 percent to $2.79.

(Editing by Kenneth Barry)

Source: http://news.yahoo.com/wall-street-drops-fed-tech-sector-weighs-000217158--sector.html

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