yahoo.reuters.com
Updates with U.S. market closes, changes byline)
By Chris Sanders
NEW YORK, June 5 (Reuters) - U.S. stocks and bonds skidded and the dollar rose on Monday after Federal Reserve Chairman Ben Bernanke's concerns about inflation increased expectations of a rate hike in June.
Bernanke said the Fed must be vigilant to make sure inflation stays under control even as the economy starts to show a slower pace of growth.
"Given recent developments, the medium-term outlook for inflation will receive particular scrutiny," Bernanke told a group of bankers.
The Nasdaq tumbled more than 2 percent and the Dow Jones industrial average slid 1.77 percent while the 2-year U.S. Treasury note sank sharply as investors read Bernanke's remarks as an assertion that the Fed would be vigilant and suggesting the central bank may raise rates in late June to temper inflation expectations.
Bernanke's comments "not only dashes hopes for a pause, but it puts the rates hikes back on the table for the rest of the year," said Barry Hyman, equity market strategist, Ehrenkrantz, King, Nussbaum.
The Dow Jones industrial average <.DJI> sank 199.15 points, to 11,048.72 and the Standard & Poor's 500 Index <.SPX> fell 22.93 points, or 1.78 percent, to 1,265.29. The Nasdaq Composite Index <.IXIC> tumbled 49.79 points, or 2.24 percent, to 2,169.62.
Following Bernanke's comments, potential for a June Fed rate hike jumped to 76 percent from 48 percent on Friday, close to the 80 percent seen last week following the release of minutes from the Fed's previous policy meeting. Continued... |
