Stocks give up gains in last hour of trading

NEW YORK -- A late-day slump left stocks mixed Wednesday as investors couldn't hold on to their optimism after the Federal Reserve gave an encouraging assessment of the economy.

The Dow Jones industrial average, up more than 150 points after the Fed described the economy as showing more signs of recovery, closed up 30. The broader indexes were narrowly mixed.

Stocks could get a lift today from Cisco Systems Inc., which reported better quarterly earnings and sales than expected after the closing bell. John Chambers, CEO of the maker of computer-networking gear, struck an optimistic tone in a conference call with analysts and said orders continue to rebound.

Analysts couldn't point to any one reason why stocks gave up their gains late Wednesday, although some said the market is increasingly nervous as the release of the government's October jobs report on Friday approaches. Financial stocks fell especially hard in the last hour of trading after a House vote to speed up the effective date of limits on credit card companies, and added to the overall market's pullback.

The Fed, as expected, left its benchmark interest rate unchanged at a record low of essentially zero and said the economy is slowly rebounding. Its announcement followed reports on service industries and employment that eased two of the biggest worries about the economy.

The Fed's statement accompanying its rate decision noted that housing activity has picked up in recent months. It also said consumer spending, while still constrained by unemployment and other problems, appears to be growing.

Policymakers said they would keep interest rates low for an "extended period" and said inflation is likely to remain tame. That eased some worries that rising prices would force the Fed to boost interest rates and risk cutting off a nascent recovery in the economy.

But, as often happens after Fed meetings, stocks were unable to hold their gains. The Fed statement, while more upbeat than in recent months, did note that there are ongoing job losses. And investors were well aware that the Labor Department's October jobs report is just two days away.

Jonathan Corpina, president of Meridian Equity Partners in New York, said investors took the Fed's statement as a sign that the central bank isn't convinced that a lasting economic recovery is under way.

"The Fed is talking about recurring job losses, sluggish incomes and housing prices not moving. So we have to remember that there are things out there that are still holding the economy back," he said.

Meanwhile, the House approved new rules for credit card companies unless lenders agree to freeze interest rates and fees. The vote would move up the February effective date of legislation already passed by Congress that limits what banks can charge for credit cards.

It didn't appear likely that the Senate would also pass the measure, but the House vote still sent financial stocks falling. And when bank stocks fall, the rest of the market tends to follow.

The Dow rose 30.23, or 0.3 percent, to 9,802.14. It had been up as much as 156 after the Fed announcement.

The broader Standard & Poor's 500 index rose 1.09, or 0.1 percent, to 1,046.50. The Nasdaq composite index fell 1.80, or 0.1 percent, to 2,055.52.

Winning stocks were ahead of losers by 8 to 7 on the New York Stock Exchange, where volume came to 1.4 billion shares, in line with Tuesday.

Michael Sheldon, chief market strategist at RDM Financial Group in Westport, Conn., said investors grew nervous ahead of the employment report and that traders also worried when the S&P 500 index moved below the level of 1,053 -- its average of the past 50 days.

"Once it became apparent that the market wasn't going to close above its 50-day moving average investors sold and moved to the sidelines," he said.

Investors have grown fearful that the economic rebound they've been betting on over the past eight months will be fleeting, considering that job losses remain high and consumers still aren't spending freely. Stocks have zigzagged over the past few weeks amid the heightened uncertainty.

The day's economic reports bolstered hopes that consumers could increase consumer spending, a critical factor for an economic recovery.

The Institute for Supply Management said service industry activity grew for a second straight month in October. The trade group's service index slipped to 50.6 from 50.9 in September. A reading above 50 signals growth.

The ADP National Employment Report said 203,000 private sector jobs were lost in October, down from the 227,000 lost in September. It was the seventh straight month of declining job losses. That stirred hopes for a better-than-expected employment report Friday.

Shares of Cisco advanced 35 cents, or 1.5 percent, to $23.30 by the closing bell and rose 3.5 percent in after-hours trading.

The dollar fell against other major currencies, helping to send commodities prices higher.

Gold rose as high as $1,096.50 an ounce. Crude oil added 80 cents to $80.40 a barrel on the New York Mercantile Exchange as the government said U.S. crude supplies fell more than expected.

Britain's FTSE 100 rose 1.4 percent, Germany's DAX index gained 1.7 percent, and France's CAC-40 jumped 2.4 percent. Japan's Nikkei stock average rose 0.4 percent.