US stocks closed little changed on Thursday, after the Federal Reserve said it sees moderate economic growth over coming quarters but signaled it remains concerned about inflation. The Nasdaq closed slightly higher, boosted by communications equipment and semiconductor stocks, which rose after brokerage upgrades of Cisco Systems Inc and Intel Corp.
The Fed left the benchmark US interest rate at 5.25 percent for an eighth straight meeting. At the same time, the central bank signaled it would remain on guard about inflation - which would take an interest-rate cut off the table.
"On the one hand, the market can take away and like that the Fed seems to think there is prospect for improvement in economic growth, but at the same time, it has probably disappointed those who were still hoping for a rate cut," said Chip Hanlon, president of Delta Global Advisors, Inc in Huntington Beach, California.
"My opinion is that the Fed is going to try and sit on its hands and do nothing for as long as possible. But if its hand is going to be forced one way or the other, it is going to be forced to raise rates. And the stock market wouldn't like that."
After the decision, the major indexes swung rapidly from being little changed to moderately higher, only to swoop lower, climb again and then fade back as investors digested the policy statement.
The Dow Jones industrial average slipped 5.45 points, or 0.04 percent, to end at 13,422.28. The Standard & Poor's 500 Index dipped 0.63 of a point, or 0.04 percent, to finish at 1,505.71. But the Nasdaq Composite Index added 3.02 points, or 0.12 percent, to 2,608.37.
The benchmark 10-year US Treasury note fell 5/32 in price, with the yield rising to 5.11 percent. Higher borrowing costs can cool investors' enthusiasm for stocks because they could cut into corporate profits and slow the pace of take-overs.
Cisco shares shot up 2.1 percent to $27.85 after Merrill Lynch lifted its rating on the stock. Cisco gave the biggest boost to the Nasdaq 100 and helped buoy the S&P 500. Intel's stock rose 0.6 percent to $23.92.
Shares of General Motors Corp jumped 2 percent to $38.15 and ranked near the top of the list of the Dow's major advancers after the automaker said it reached a deal to sell its Allison Transmission unit to private-equity firms Carlyle Group and Onex Corp. The Dow slipped earlier in the day, after data showed inflation was higher than previously thought in the first three months of 2007.
Energy stocks rose after US crude oil climbed above $70 a barrel for the first time since September 2006 as a surprisingly steep decline in US gasoline inventories revived supply worries during the height of the summer driving season. US crude fell back to below $70, settling at $69.57 a barrel, up 60 cents.
A sharp drop in natural gas prices drove down the Philadelphia Oil Services Index by nearly 1.5 pct. Trading was moderate on the NYSE, with about 1.50 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.99 billion shares traded, below last year's daily average of 2.02 billion. Advancing stocks outnumbered declining ones by a ratio of about 3 to 2 on the NYSE and by 15 to 14 on Nasdaq.