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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (2151)	7/15/2002 1:17:48 PM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Bush sees 'hangover' effect on market By William L. Watts, CBS.MarketWatch.com Last Update: 1:12 PM ET July 15, 2002 BIRMINGHAM, Ala. (CBS.MW) -- President Bush attempted to reassure Americans on the state of the economy Monday, saying the nation's economic fundamentals are sound but masked by the "hangover" from the "economic binge" of the 1990s. "In order for us to have the security that we all want, America must get rid of the hangover that we now have as a result of the binge, the economic binge, we just went through," Bush said in a speech in Birmingham, Ala. The pep talk failed to soothe stock markets as the Dow Jones Industrial Average ($INDU: news, chart, profile) surrendered 329 points, or 3.8 percent, to 8,355 in afternoon trading. That marks a nearly 1,000-point loss since the July 5 close and the blue-chip gauge's lowest level in 10 months. The Nasdaq Composite edged down 1.1 percent, or 15 points, to 1,358. Bush said the fundamental U.S. backdrop remains favorable. "It has got the foundations for growth. This economy is coming back," he said, citing low inflation and "reasonable" interest rates. Bush also used the speech to reiterate calls for corporate reforms. The Senate was expected on Monday to overwhelmingly pass a Democratic-backed bill on corporate accountability. That package must be reconciled with a less far-reaching set of measures passed by the Republican-controlled House in April. He called on lawmakers to send him a final bill before they leave for their August recess. Bush also lectured corporate executives again to emphasize ethical standards. ________________________________________ William L. Watts is a reporter for CBS.MarketWatch.com.

To: Jim Willie CB who wrote (2151)	7/15/2002 1:19:54 PM
From: stockman_scott	Respond to of 89467

Business spending key to growth Bond market group's survey is cautiously optimistic By William L. Watts, CBS.MarketWatch.com Last Update: 12:43 PM ET July 15, 2002 WASHINGTON (CBS.MW) - Bond market economists expect a continuing U.S. recovery to gradually push up interest rates, they said on the eve of Fed Chairman Alan Greenspan's semiannual report to Congress. Recovering business investment will help sustain the U.S. economic recovery -- if it can stave off the effect of stock market weakness and the threat of terror attacks, according to a new survey of bond market professionals Based on its semiannual survey, the Bond Market Association's Economic Advisory Committee projected U.S. gross domestic product to grow 3.8 percent in 2002 and 3.7 percent in 2003. Business investment, which has been on the decline for the past five years, is expected to be a key driving factor, taking over from resilient consumer spending that can't be expected to continue driving a recovery, the committee said. But the economists also sounded a note of caution. "This is the one (area) that could go awry," Frederick S. Breimyer, an economist at State Street Corp. and a member of the advisory committee, told reporters. If investment continues its gradual recovery, however, it is expected to pace the rebound into 2003, he said. The committee's consensus forecast predicts the Federal Reserve will begin tightening interest rates by the end of the year, nudging up the Fed funds rate a quarter-point by the end of 2003 to 2 percent. By September 2003, the committee expects the rate to be at 3 percent. Federal Reserve Chairman Alan Greenspan will deliver his semiannual monetary policy report to Congress on Tuesday. Bill Dudley, chief economist at Goldman Sachs and chairman of the Economic Advisory Committee, said he expects Greenspan to be cautiously upbeat. "It will be the glass is half-full rather than the glass is half-empty." Dudley said just more than half of the panel's 26 members saw rates rising by the end of the year, while all saw the Fed moving by mid-2003. As a result of expectations for continued growth and a rise in official interest rates, the panel expects the yield on the 10-year Treasury note to rise by about 1 percentage point to 5.65 percent by September 2003. As a result, home mortgage rates are also expected to rise, but not enough to put much of a damper on home sales. Downside risks The survey found committee members believe continued accounting and corporate governance scandals have eroded investor confidence and undercut stock prices, contributing to a reverse "wealth effect" that has cut into consumer spending and increased capital costs for businesses looking to invest. Other threats include further terrorist attacks or an erosion of consumer confidence due to future U.S. military engagements. A substantially weaker dollar and higher energy prices are among potential developments that could also sap growth, the economists warned. Meanwhile, inflation is expected to remain tame. The panel forecasts a 2.3 percent rise in 2002, followed by a 2.6 rise in 2003. Unemployment is seen averaging 5.9 percent this year and 5.7 percent in 2003. __________________________________________ William L. Watts is a reporter for CBS.MarketWatch.com.