wall street wobbling
11 June 2008

The Dow Jones Industrial Average of blue chips drifted in and out of positive territory before closing up a modest 9.44 points (0.08 percent) at 12 289.76.

The Nasdaq composite fell 10.52 points (0.43 percent) to 2448.94 and the broad-market Standard & Poor's 500 index dipped 3.32 points (0.24 percent) to 1358.44.

The market's focus was on Bernanke as he expanded on his toughened message on inflation in comments late on Monday, arguing that the Fed would work hard to keep inflation expectations in check, which in turn would help keep a lid on price pressures. He said the policymaking Federal Open Market Committee "will strongly resist an erosion of longer-term inflation expectations."

This put the markets on edge as speculation flew that the central bank might soon raise interest rates after an aggressive cycle of cutting rates to stimulate flagging growth. "All this tough talk is depressing stock prices again," said Ed Yardeni at Yardeni Research. "Clearly the market's worry early today was that the Fed might begin raising rates," added Gregory Drahuschak at Janney Montgomery Scott.

"The market's fear is that at some point higher rates will stymie economic growth. We do not think that the current economic situation allows the Fed to do much with rates other than token hikes. Nonetheless, the fear of the aftermath of higher rates is likely to be a restraining factor."

Meanwhile a Commerce Department report showed a surge in imports and skyrocketing oil prices offset the impact of a weak dollar and pushed the US trade deficit in April up to $60.9-billion.

Economists noted however that the deficit increase was mostly due to inflation, especially higher oil prices — which many analysts say may be peaking — and that the volume of US exports was still improving.

Among stocks in focus, Ford Motor Co. slid 3.77 percent to 6.12 dollars after news that billionaire Kirk Kerkorian had increased his stake in the struggling carmaker to 5.5 percent in a tender offer oversubscribed.

Texas Instruments fell 2.9 percent to 30.42 dollars after the semiconductor maker revised its earnings guidance for the current quarter.  XTO Energy dropped 1.03 percent to 67.02 dollars after it agreed to buy the family-owned Hunt Petroleum created by tycoon HL Hunt for over four-billion dollars.

Apple rose 2.22 percent to 185.64 dollars, rebounding from a slide in the prior session after announcing plans for a new version of the popular iPhone that will include more features at a lower cost. In finance, Lehman Brothers extended its losses, dropping 6.7 percent to 27.50 a day after announcing it expects a big loss and needs to raise fresh capital. But the rest of the sector rebounded: Citigroup rallied 3.37 percent to 20.26 and JPMorgan Chase added 2.08 percent to 38.29. Washington Mutual recovered 6.88 percent to 6.68 dollars a day after a 17 percent slide.

Bonds fell on the Bernanke comments. The yield on the 10-year US Treasury bond rose to 4.099 percent from 3.992 percent on Monday and that on the 30-year bond increased to 4.701 percent against 4.621 percent. Bond yields and prices move in opposite directions.

http://business.iafrica.com