Transcripts

Interest Rates & Inflation Put The Brakes On The Wall Street Rally

LINDA O'BRYON: Another big sell off on Wall Street. Continued concerns about inflation and interest rates sent the Dow tumbling nearly 120 points and the NASDAQ falling 29. That brings the two-day loss for the Dow to 261 points. As Suzanne Pratt reports, it also leaves investors asking whether the rally has hit a major impasse or just a small speed bump.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: In just two days, the Dow has gone from the brink of an all-time high to a point in which that goal feels very far away. Still, the blue chip index is only about 350 points shy of its record and some traders say attaining it is just a matter of patience.

ARTHUR CASHIN: There`s a rather inelegant slogan down here that it`s often the second mouse that gets the cheese. The first one doesn`t fare very well. So brokers are reluctant to climb on board the bandwagon the first time it`s around.

PRATT: Experts blame the market`s sudden reversal on the Federal Reserve and rising worries that policymakers will have to keep hiking rates to fight inflation. On Wednesday, the Fed said depending on incoming economic data more rate hikes could be needed. The surge in energy and other commodity prices has stoked those fears in the last few days. Still, many market pros think the stock market`s rally is simply on hiatus. BEN PACE: This is a correction. But, it`s definitely been led by concern about inflation, particularly with crude oil prices going up, energy prices continuing to go up. So, I think that`s been the major impetus of what we think is going to be more of a temporary correction as opposed to the beginning of any kind of bear market.

PRATT: Experts predict oil prices will be the biggest headache for investors this summer. And, while most expect stocks will resume the rally again, some believe that may not happen for a few months.

JAMES AWAD: I think when it`s all said and done the market will go higher. But, you are not going to have the conditions for that to happen for a few months. So, it`s likely for now that we`ve peaked as we work our way through the data points to the next Fed meeting.

PRATT: Many experts predict the Dow will reach its all time high later this year and even trade beyond 12,000. They say it will be solid corporate profits that ultimately power stocks higher. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.