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To: Sarmad Y. Hermiz who wrote (114520)	1/5/2001 8:51:52 PM
From: H James Morris	Respond to of 164684

Sarmad, this is reality. It did not come from the Motley fool or the ragging bull. >Published: January 5 2001 21:06GMT \| Last Updated: January 5 2001 23:26GMT US shares on Friday gave up much of the gains made following the Federal Reserve's surprise cut in interest rates this week as investors became nervous about the risk of a hard landing for the economy. Labour department figures reporting a rise in wage gains at the same time as weak employment growth prompted fears that the economic slowdown might be accompanied by rising inflation, preventing the Fed from cutting interest rates enough to stave off a recession. Market rumours also suggested that the Fed's dramatic action on Wednesday might have been prompted by as-yet undisclosed losses in the banking system. The Dow Jones index closed down 251.62 at 10,660.79 and the Nasdaq down 158.87 at 2,407.96. The official jobless rate in December, which some economists had expected to show an increase, was unchanged from November's 4 per cent - just above the 30-year low of 3.9 per cent. Employment outside the agricultural sector grew by 105,000 last month following November's 59,000 gain. But there were many signs of weakness in the report. A surge in service sector and government jobs masked continued heavy layoffs in manufacturing. Private-sector payroll gains slowed sharply from 111,000 in November to 49,000 in December, capping off the weakest 12 months of US job growth in almost eight years. Total non-farm employment has risen only 1.47 per cent in the year to December, also the weakest growth in eight years. Some economists also warned that what they consider a worrying inflationary sign in the report could limit the Fed's freedom to follow Wednesday's cut with further reductions. The rise in average hourly earnings accelerated to a two-year high of 4.2 per cent in the year to December. Over the past six months wage gains have accelerated at the fastest rate of any six-month period since 1989. Sophia Koropeckyj, an analyst for Economy.com, a Pennsylvania advisory firm, said concern about the inflationary impact of rising labour costs "makes it somewhat uncertain whether the Fed will again lower rates at the end of the month". However, other economists dismissed any anxiety about inflation. The federal funds futures market continued to price in a significant monetary easing this year. The markets now expect a further half-point reduction at the next meeting of the Fed's policy-making open market committee on January 30-31, and an additional 75 basis point reduction by August, taking the fed funds rate to 4.75 per cent. The dollar continued to slide against the euro. By the close of European trading, the euro was at its highest level for six months.