Wall Street report: Monday close

INVESTORS were unwilling to place big bets ahead of key votes on the future of interest rates and on a merger important to the future of the most powerful woman in American business.

Tuesday's meeting of the Federal Reserve Board on interest rates and shareholder voting on tech giant Hewlett-Packard's proposed merger with personal computer maker Compaq had many investing decisions on hold, analysts said. The Dow Jones Industrial Average retreated 29.48 points or 0.3% to 10,577.75. The Nasdaq Index clung to a gain of 8.76 points or 0.5% to 1877.06.

Economists expect no change in official rates, currently at 40-year lows, when the Fed meets. But they will be looking at the wording of any statement to see if the central bank is more likely to raise rates, possibly at its next meeting in May, in the face of stronger than expected growth in the US economy.

That issue was underscored by a report from Merrill Lynch's chief economist Bruce Steinberg predicting that the economy might be growing as fast as 6% in the first quarter, well ahead of expectations. But Merrill said it did not expect the Fed to raise rates until the third quarter. The economy grew at just 1.4% in the fourth quarter of last year after a recession regarded as among the mildest on record.

Jim Glassman, senior economist at JP Morgan, said the Fed might not signal a change in its stance. 'The surprise could be that they are not in such a big rush to even begin to consider raising rates,' he said. The Fed cut rates 11 times last year to leave its key lending rate at 1.75%, a level not seen since John F. Kennedy was in the White House.

Financial services shares turned lower in afternoon trading with Citigroup down fractionally at $49.55, JP Morgan lower by 67 cents or 1.9% to $35.34 and American Express off 20 cents or 0.5% to $41.95.

The shareholder vote on Hewlett-Packard's proposed merger with Compaq, the brainchild of H-P chief executive Carly Fiorina, has triggered pointed exchanges and commentators say the outcome is too close to call.

Fiorina has refused to say whether she will resign if the agreed merger is rejected by shareholders. But opposing forces led by the company co-founder's son Walter Hewlett are expected to push for her removal if the vote goes against her. H-P shares rose 20 cents or 1% to $19.25. Compaq was flat at $10.36.

Telecoms group Qwest was among the biggest winners after it said it had lined up $4bn in credit lines to tide it through the year. Qwest shares have lost a third of their value in the past three months on concerns over its accounting and liquidity. In the same sector, WorldCom, which faces an official inquiry into its affairs, fell 34 cents or 4.6% to $7.06.

Micron Technology fell 14 cents or 0.4% to $33.25 as it reportedly neared a $4bn deal to buy South Korea's Hynix Semiconductor in a move that would make Micron the biggest maker of computer memory chips. Security software maker McAfee surged $3.91 or 25% to $19.45 as Network Associates said it would buy the remaining shares in McAfee it did not own for about $208m.

Techs were mixed with Microsoft trimmed 35 cents or 0.6% to $62.14. Negative analysts' comments on the networking sector did little damage to Cisco Systems, off fractionally at $16.52, and Ciena, largely unchanged at $8.89.

Among Dow components, Walt Disney added 19 cents or 0.8% to $24.51 and Wal-Mart dipped 20 cents or 0.3% to $63.55.