June 05, 2006


For those new to all this economics news, just watch the price of GOLD soar in the next few days. Silver, too. (And unfortunately the graphic of the Dow today won't post!!)

The Federal Reserve meeting last week showed that there is concern among them about dealing with inflation, but nothing at all was done to rectify the situation.

Time to stock up on dry food and find cheap transportation as the rich will find a way to keep making super profits no matter how much the stock market crumbles in upcoming days.

Stocks plunge on inflation fears
Updated 6/5/2006 4:33 PM ET

NEW YORK (AP) — Inflation fears sent stocks plunging Monday after Federal Reserve Chairman Ben Bernanke warned that the central bank remains determined to keep lifting interest rates until price increases are under control.

At the close, the Dow Jones industrial average was down 199.15, or 1.77%, to 11,048.72. The Dow is 5% off its six-year high of 11,642.98, reached May 10.

Broader stock indicators also fell. The Standard & Poor's 500 index was down 22.93, or 1.78%, to 1265.29; the Nasdaq composite index slumped 49.79, or 2.24%, to 2179.24, falling into negative territory for 2006.

Bernanke told an international monetary conference that while rising energy costs have helped slow the pace of economic growth, higher core inflation — excluding energy and food — is still a concern and could warrant more rate tightening. That sparked worries about higher rates in a slowing economy, which could prevent stocks from any long-term moves higher.

Stocks were already hurting from oil supply jitters after Iran said it would curtail distribution if Western nations punish or attack the country over its nuclear arms program, unnerving a market already concerned that severe hurricane activity could devastate Gulf Coast refineries again this summer. A barrel of light crude gained 62 cents to $72.95 on the New York Mercantile Exchange.

"It looks like a very mixed market; even within sectors, everything is mixed," said Steve Neimeth, senior vice president and portfolio manager at AIG SunAmerica. "With continued evidence that the economy is slowing and higher risk due to oil prices, the market has become increasingly skittish."

Bonds slumped on interest rate worries, with the yield on the 10-year Treasury note rising to 5.02% from 5% late Friday. The U.S. dollar was little changed against other major currencies; gold prices returned to about $645 an ounce.

Overseas stock markets saw persistent weakness from recent worries about slowing global demand. Japan's Nikkei stock average slumped 0.8%; Britain's FTSE 100 was flat; Germany's DAX index plunged 1.2% and France's CAC-40 was lower by 0.9%.

In economic news, the Institute for Supply Management said its services index for May dropped 2.9 points to 60.1, nearly in line with estimates for a reading of 60. However, the prices paid component surged 7 points to 77.5, stirring fears about inflation.

Although economists had predicted a dip in the ISM index, the slower growth built on concerns about whether the economy was moderating too quickly. On Friday, a sharply larger-than-forecast slide in monthly job growth left investors wondering if the economy was headed for a steep dropoff.

Meanwhile, persistently high oil and gasoline prices put more strain on consumers as lending rates continue rising and home values stabilize, the combination of which is feared to trigger a downturn. Consumer confidence readings later this month will be a critical aspect of the economic picture, said Scott Fullman, chief investment strategist for Hapoalim Securities USA.
"This concern over oil is really the driving force of the market," Fullman said. "We're coming into vacation season. (Energy prices) are going to play an awful lot on how consumers will be spending their money this summer."

Oil-related stocks sold off earlier gains despite the boost in crude prices. Chevron

Harrah's Entertainment stumbled after it last week lost a bid to build a new casino resort in Singapore to rival Las Vegas Sands. Harrah's fell while Las Vegas Sands climbed.

SanDisk rose after Bear Stearns upgraded the flash memory maker to "outperform," citing lesser concerns about near-term oversupply issues.

Copyright 2006
Posted 6/5/2006 3:55 PM ET

No comments:

ShareThis