Transcripts

Wall Street's Week Of Rallies & Worries

LINDA O'BRYON: It was a week that most investors would rather forget. Stocks ended a losing week with more losses on renewed concerns about inflation. The Dow fell 46 points today and more than 350 points this week. The NASDAQ posted its sixth straight loss, down 10 points to a seven-month low. Scott Gurvey reviews the volatile week on Wall Street and elsewhere.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Inflation, inflation, inflation. The market`s favorite bogeyman gets the blame for the worst week we`ve seen in nearly a year. The Dow fell 3.2 percent, the NASDAQ 3.8 percent, the S&P 500 2.8 percent, the Russell 2000 4.9 percent. And the losses were not limited to America. Morgan Stanley`s Europe, AustralAsia, Far East index fell 5.7 percent this week, its biggest drop in four years, while the emerging markets index lost 7.9 percent. All of this the result of investors` fear around the world as central banks will continue to raise interest rates to combat inflation.

BARRY HYMAN, EQUITY MARKET STRATEGIST, EKN FINANCIAL: Inflation is the worst possible thing that can happen to an economy. Trends back in the 1970s, early `80s will tell you that it`s hard to attract capital to equity markets or any other investment other than cash or bonds when interest rates are going higher because the yield is a great alternative. GURVEY: This week the European central bank raised its benchmark interest rate a quarter of a point to 2.75 percent. Also this week Federal Reserve officials signaled the markets to expect another hike in interest rates when the Fed meets on June 28 and 29th. The Fed funds rate now stands at 5 percent. All the talk from the Fed, some say, has the effect of increasing volatility because it raises investor fears. They note that while stocks sold off sharply this week, the bond market was relatively stable and the price of gold, usually seen as an inflation hedge, actually fell.

JACK CAFFREY, EQUITY STRATEGIST, JP MORGAN SECURITIES: If people were worried about inflation, you`d be seeing more weakness in fixed income. You`d be seeing more strength in gold. This strikes us as concerns about the fear the Fed overdoes the interest rate story and chokes off economic growth, as a result reduces profitability. So this is more of a growth scare rather than an inflation scare.

GURVEY: Both scared investors and the Fed will get some new data on inflation next week when reports are expected on both consumer and producer prices. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.