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To: Captain Jack who wrote (31166)	5/16/1999 6:44:00 PM
From: bob	Read Replies (2) \| Respond to of 31646

Uncle Al back in play. Sunday May 16, 11:26 am Eastern Time WALL ST WEEK AHEAD - Federal Reserve weighs in By Jennifer Shaw NEW YORK, May 16 (Reuters) - Get ready to duck. The odds that the Federal Reserve this week will deliver Wall Street a powerful one-two punch are rising, after economic data showed that inflation may not be as far away as many had thought. The stock market is approaching the next meeting of the Federal Reserve's interest rate policy committee, which is set for Tuesday, with trepidation. The central bank's Federal Open Market Committee meets to determine whether it will adopt a bias toward tighter monetary policy or keep interest rates unchanged. The Fed will follow up on Thursday with the release of minutes of its earlier meeting, which was held on March 30. Predicting the outcome of the FOMC meeting is akin to calling a coin toss, said Hugh Johnson, chief investment officer at First Albany Corp. ''The odds of a Fed interest rate increase next week have gone from 1-in-10 to 5-in-10,'' he said. Asked for a heads-or-tails call, Johnson said he did not expect the Fed to raise rates Tuesday, but a cycle toward a tightening bias could start. ''The markets are reflecting a move by the Fed between now and the end of the third quarter,'' he said. ''I think they will defer next week but you can't be as sure now.'' On Thursday, the Fed's policy-setting arm releases the minutes from its March meeting. Those will help point to how much concern a stronger-than-expected economy was raising at the Fed during that policy-setting meeting, in which it held rates steady. The outlook for rates, always important for stocks, has become a fixation on Wall Street both because the earnings reporting season has just about ended and because low interest rates have gotten much of the credit for the latest leg in the stock market's bull run. Thomas Galvin, chief investment officer of Donaldson, Lufkin & Jenrette said in his weekly report that the market has ''little to focus on other than the FOMC meeting'' and that ''recent comments from Chairman Greenspan suggest that the drumbeat of a tightening bias by the Fed is likely in forthcoming meetings.'' Investors are worried because Fed governors will have a fresh sheaf of inflationary evidence; the Consumer Price Index climbed 0.7 percent in April, its sharpest monthly gain since October 1990. Even when volatile energy prices were excluded, prices still rose 0.4 percent. The big rise in consumer prices triggered a drop of 194 points in the Dow Jones industrial average on Friday, with tbe drop coming a day after it finished at a record 11,107.19. It was the third-biggest point-drop of the year for the Dow, which was off 118 points for the week. ''This is the first hint of any inflationary prospects we've seen in months and it should put an inflationary fear in the market,'' said Barry Hyman, market strategist at Ehrenkrantz, King & Nussbaum. ''Having that meeting Tuesday creates more anxiety.'' Ironically, the CPI increase came after a relatively tame payrolls and wage report that had led many to discount the potential for an interest rate increase. ''We will finish this week on a very ominous note and we will start next week on an ominous note,'' said First Albany's Johnson. ''It's very clear that things have changed. For a long time we enjoyed an abnormal cycle where inflation and interest rates remained very subdued. Now it appears to investors that it's going to be a normal cycle.'' Spiking rates in the U.S. Treasury market have added to investor jitters. On Friday, the benchmark 30-year Treasury bond plummeted 2-9/32, or $22.8125 on a $1,000 bond, lifting the yield to the highest in nearly a year at 5.93 percent. Among late-reporting earnings companies, on the technology front, Hewlett-Packard Co. (NYSE:HWP - news) reports on Monday and Dell Computer Corp. (Nasdaq:DELL - news) on Tuesday. Warner-Lambert Co. (NYSE:WLA - news) holds a meeting Tuesday to discuss its drug pipeline with analysts. American International Group Inc. (NYSE:AIG - news) holds its annual meeting on Wednesday.