U.S. Stock marketJuly 3rd, 2008 - 5:02 pm ICT by Amrit Rashmisrisethi
U.S. short-term interest rate rose, in the U.S. stock market could prevent the Federal Reserve from hiking lending rates, even as inflationary forces gather.
The shrinking wealth effect felt by Americans as their investments and housing values fall could feed into consumer confidence and retail spending.
The projected year-end fed funds rate fell to 2.375 percent from 2.41 percent.Recently the mid-June dealers were pricing a rate of 2.855 percent by the Federal Open Market Committee meeting.
“The prevailing level of confidence in the economy and the financial markets has recently gone from one of steady concern to one of heightened nervousness,” said Ralph Manigat, analyst at 4CAST Ltd in new York.
Fed Governor Frederic Mishkin said in a speech in Israel ,the U.S. economy “will be subject to substantial headwinds for some time.”
The Dow Jones industrial average closed down 1.46 percent and bear market territory, more than 20 percent off its record high close.
The Commerce Department said factory orders in May rose by 0.6 percent against forecasts for a 0.4 percent advance.
“Much of the increases were due to higher food and energy prices,” said Steven Wood, chief economist at Insight Economics in Danville, California. “The production of factory goods for domestic sale is basically moribund.”