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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (41494)	5/22/1999 8:31:00 AM
From: kendall harmon	Read Replies (1) \| Respond to of 120523

Interest rates again. Inflation Worries Prompted Fed 'Tilt' Toward Rate Hike By John M. Berry Washington Post Staff Writer Friday, May 21, 1999; Page E03 When Federal Reserve policymakers met March 30, they unanimously agreed not to raise short-term interest rates and also not to "tilt" toward doing so because the outlook for economic growth and inflation was too uncertain to warrant such a step, according to minutes of the meeting released yesterday. On Tuesday, however, the Federal Open Market Committee adopted just such a tilt and announced, for the first time ever, that it had done so. The FOMC still didn't raise its 4.75 percent target for the federal funds rate, the overnight rate financial institutions charge one another on loans, but it put the world on notice that it was considering doing so. What happened in between those meetings was a series of economic reports that pointed generally in the same direction -- up -- increasing concern among Fed officials that sooner or later the ebullient U.S. economy will drive up the inflation rate. At the end of March, Fed officials knew consumer spending was increasing fast enough to power solid economic growth for the first quarter. But the Commerce Department estimated in late April that the economy had grown by a faster-than-expected 4.5 percent rate in the first three months of the year. That was down from the blistering 6 percent growth of the final three months of last year, but still well above the pace most Fed officials believe can be sustained without inflation at a time of low national unemployment. Other economic reports have provided only scattered signs -- such as a decline in housing starts last month, and small gains in retail sales for both March and April -- of the economic slowdown predicted by most Fed officials. Since the March meeting, some Fed officials have come to see that forecast as increasingly questionable. Meanwhile, stock prices have resumed their upward march, reinforcing the long-standing Fed worry that increases in consumer spending, which have powered recent economic growth, may not slow. Fed officials are convinced that consumer spending has been rising because household wealth has risen along with stock values. For instance, the Fed staff forecast presented at the March 30 meeting predicted that the pace of economic growth would gradually slow. Among the reasons cited were that, at that time, stock prices were rising more slowly than last year. The linkages run roughly like this: Rising wealth and substantial increases in workers' inflation-adjusted pay encourage more consumer spending. Labor productivity -- the amount of goods and service produced for each hour worked -- has been going up significantly, but consumer and business spending has gone up even faster. Among the results are tight labor markets and a low unemployment rate, a rate that Fed Chairman Alan Greenspan fears could be pushed down to the point that wages begin to rise in an inflationary fashion. The FOMC said in its statement Tuesday: "Against the background of already-tight domestic labor markets and ongoing strength in demand in excess of productivity gains, the Committee recognizes the need to be alert to developments over coming months that might indicate that financial conditions may no longer be consistent with containing inflation." In the seven-week interval between meetings, there were several other developments that worried FOMC members. High on the list was the substantial increase in yields on longer-term U.S. Treasury securities. While the reasons for that increase are hard to sort out, among them is a fear that inflation is likely to accelerate later this year, in the view of some Fed officials. Another important fact was the improving outlook for economic growth among several of the East Asian nations hit hard in 1997 and last year by the global financial crisis. Those improved prospects, plus the apparent turnaround in conditions in Brazil, have contributed to increases in previously falling world commodity prices -- declines that have helped keep U.S. inflation low. At the same time, the better outlook for those developing nations and other financial market indicators, such as the narrowing spreads between yields on Treasury securities and private-sector bonds, indicate that the danger of another shock to world financial markets has receded. In short, the FOMC concluded Tuesday that the risk of rising inflation had increased since the March meeting, and the likelihood of some debilitating financial upheaval had gone down. But that risk still wasn't large enough to justify raising rates now. The minutes from the March 30 meeting also mentioned some members' concern that announcing a tilt toward raising rates then would rattle financial markets, which were not expecting such action. By Tuesday, however, the string of strong economic reports had led to widespread speculation in the markets that the Fed might lean in that direction. The Fed's next action on rates, if any, will depend on the news between now and the next FOMC meeting on June 29 and 30.

To: Jenna who wrote (41494)	5/22/1999 10:45:00 AM
From: Chuck	Read Replies (2) \| Respond to of 120523

Jenna, Your thoughts on FNM? Has oscillated between 66 and 73 every 9 to 10 days for the past 6 months. Currently at support.

To: Jenna who wrote (41494)	5/22/1999 1:18:00 PM
From: shag007	Respond to of 120523

Jenna, Fascinating posts. An absolute must read. Have bookmarked to go over them when things get crazy. Along with some discipline and emotional materials that I usually go through. Thank You. 1. My Internet Strategy through the next earnings cycle..AOL,INKT,NTBK (or NITE),VRSN,EBAY,YHOO, ATHM 2. My Intermediate term-hold Strategy through next few months... 3. General TIPS on the Watch List / Earnings Plays and Silicon Investor