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To: scotty who wrote (28938)	2/24/1999 6:40:00 PM
From: goldsnow	Respond to of 116860

Business: The Economy Bond move spooks US shares Are US markets overvalued and heading for a correction? US shares closed sharply lower as a jump in bond interest rates, to their highest levels in six months, increased worries that the stock market may be overvalued and about to undergo a correction. The Dow Jones index of leading shares ended 1.5%, or 145 points lower, at 9,400. The Nasdaq index, home to many Internet and technology shares, was also badly hit. It fell 37 points, or 1.6%, to 2,339. The performance of companies on the Nasdaq has been a major driving force behind recent surges in US stock values. Late sell-off After buoyant international markets prompted a firm start, US shares registered a sharp fall in late trade as the interest rate on the benchmark 30-year Treasury bond jumped to 5.5%, its highest since 21 August, just after the Russian default. "It's all about the bond-market," said Bill Meehan, chief market analyst at Cantor Fitzgerald. "The bond broke and stocks fell sharply." The jump in bond interest rates spooked investors who have been worried for some time that last year's interest rate cuts may lead to an over-buoyant economy and a rise in inflation. They fear this would prompt the US central bank, the Federal Reserve, to raise interest rates again. Greenspan effect US markets have been particularly jittery in the last two days as the bank's chief, Alan Greenspan, has been passing his judgement on the country's economy in a testimony to US Congress. He said nothing to calm fears of an imminent correction, describing share prices as overvalued and a threat to continued economic expansion. Mr Greenspan said the bank would do whatever was necessary to preserve US economic expansion. It is the one remaining area of the world which is still enjoying robust growth. He was upbeat about economic prospects, but emphasised the danger of inflation. He said falling job vacancies could push up wage expectations, which in turn could push up prices generally. The central bank expects US inflation to move up slightly to 2-2.5%. Among the other risks he cited were high levels of debt by households and companies, the growing US trade deficit, and economic weakness in many overseas markets. He said the bank was reviewing whether its rate cuts in the autumn were still justified as the global economic crisis had moderated. news.bbc.co.uk