International markets: New York - Foreign tensions cloud Wall St
Sunday 16 November 1997
"There's a higher probability over the next three to six months that the Fed would ease interest rates rather than tighten," said Harvey Hirschhorn, manager at Stein Roe & Farnham in Chicago.
But until investors have a better understanding about the consequences of the developments overseas, they will be reluctant to commit new money to the stock market. "The psychology of the market is pretty negative," said Ed Haldeman, a partner at Cooke & Bieler in Philadelphia.
For the week, the Dow lost 8.84 points, about a 10th of 1 per cent. The Standard & Poor's 500 added 0.84 of a point. The Nasdaq Composite Index, lost 1.2 per cent.
The turmoil abroad has overshadowed some positive developments at home, money managers said. Economic reports last week showed that inflation remains at bay, which sent bond yields lower and increased the likelihood that the Federal Reserve will stand pat on interest rates into 1998.
The yield on the benchmark 30-year Treasury bond, which sets lending rates around the globe, fell to 6.09 per cent on Friday; three months ago, the yield was 6.55 per cent.
"We're seeing some improving fundamentals in the economy, in terms of interest rates," said Charles White, at Avatar Associates. "Turmoil in foreign currencies keeps the Fed out of the game and allows interest rates to drift lower. That's supportive for equities."
That thinking, combined with signs the economy may be losing steam, has some investors looking for a rate cut in the months ahead. Until recently, robust economic growth and the lowest unemployment rate in a generation had many investors convinced that the Fed would need to boost bank lending rates soon to keep inflation from accelerating. Among those was William Gross, chief investment officer of Pacific Investment Management and one of the most closely watched bond investors, who a month ago was looking for a rate increase - until the recent market turmoil in Asia.
"Now my sense is that ultimately the Fed lowers rates as opposed to raises them," said Mr Gross. He predicts yields on benchmark 30-year bonds may fall below 5.5 per cent next year.
Fed Chairman Alan Greenspan in Congressional testimony on Thursday said troubles in Asia were one of the reasons the Fed left bank lending rates steady earlier this week.
Copyright: IOS & Bloomberg
Missing Malaysia Airlines Flight MH370: Wreckage could be found within a week as search reaches 'very critical juncture', says minister
The man they forgot to lock up: Mike Anderson was sentenced to 13 years in jail, but the police never came
Unbeliebable: The White House offer 'no comment' to anti-Justin Bieber petition
Loch Ness Monster found on Apple Maps?
South Korea ferry disaster: Families watch as remains of Sewol victims returned to shore
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
An open letter to Nigel Farage: you may smile, but I am not seduced
Abdullah Deghayes: My son was the martyr of a just cause, says father of British teenager killed in Syria conflict
- 1 Easter egg hunt horror as mother finds dead body under deck of house
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Unbeliebable: The White House offer 'no comment' to anti-Justin Bieber petition
- 4 Loch Ness Monster found on Apple Maps?
- 5 Shropshire criminals ‘using unmanned drones and infrared cameras to find illegal cannabis farms’ – and then steal from the growers
iJobs Money & Business
Negotiable: Harrington Starr: Database Team Lead ( Leadership, Sybase, Compute...
£40000 - £50000 per annum + Bonus+Benefits+Package: Harrington Starr: C#.NET D...
£25000 - £35000 per annum + Bonus+Benefits+Package: Harrington Starr: VB.NET S...
£45000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Trade Suppor...