Sun, Aug 27, 2006 - Page 10 News List

Wall Street sags as traders fret over slowing economy

LACKLUSTER PERFORMANCE New York markets closed the week lower as investors tried to determine whether the US economy was headed for a hard or soft landing

AFP , NEW YORK

Wall Street's major indexes lost ground over the past week as traders fretted over US economic growth and turned their attention to the coming week's updates on personal spending and the job market.

In the week to Friday, the blue-chip Dow Jones Industrial Average fell 0.86 percent to 11,284.05, while the technology-packed NASDAQ market closed down 1.09 percent on the week at 2,140.29.

The broad-market Standard & Poor's 500 declined 0.55 percent to 1,295.09.

The market's lackluster performance came amid slow summer trade, but as debate mounted over whether the vast US economy is headed for a soft or a hard landing following a long string of interest-rate hikes.

Fed policy-makers, however, put a brake on their rate hikes on Aug. 8, opting to keep the fed funds rate pegged at 5.25 percent.

"The economy is clearly slowing. What happens next probably depends on the Fed," observed Philip Orlando, an analyst at Federated Securities.

"At the moment, our biggest concern is the consumer, who is being pinched by rising energy prices and interest rates," Orlando said.

Wall Street will get a fresh insight into consumer attitudes on Tuesday when the Conference Board releases its consumer confidence index reading for this month.

Most economists expect the index, which tracks consumer attitudes, to moderate to 103.7 from July's 106.5 reading.

Economists track consumer attitudes closely because consumer spending accounts for some two-thirds of US economic growth.

"The market will be interested to see if the weakness in housing has a kind of effect on consumers, if they cut back their spending. That is what Wall Street is focused on," said Mace Blicksilver, an analyst at Marblehead Asset Management.

Further light might also be shone on the Fed's position on Tuesday when the central bank is due to release the minutes of the Aug. 8 rate meeting.

The rest of the week will yield updates on consumer spending, auto sales and nonfarm payrolls employment, although Wall Street trading is not expected to be heavy as many traders are taking annual holiday leave.

Consumer spending is expected to rise to 0.8 percent in July from a 0.4 percent gain registered in June.

The government's nonfarm payrolls report, due for release Friday, is expected to show nonfarm job growth rose to 125,000 this month, from a hiring pace of 113,000 in the prior month, according to a consensus forecast.

Despite the projected rise, such a clip in August would still be sub-par for the US economy.

Auto sales will also be watched closely, especially as Japanese car giant Toyota overtook Ford last month as the US' second-largest automaker behind General Motors.

Overall car sales for August are expected to moderate to 5.4 million cars, compared with 5.6 million in July.

Bond prices strengthened over the week.

The yield on the 10-year Treasury bond dropped to 4.791 percent from 4.835 percent a week earlier, while that on the 30-year bond fell to 4.932 percent from 4.973 percent. Bond yields and prices move in opposite directions.

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