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Wall Street angst persists as Fed rate meeting looms

Unable to shake off credit market angst, Wall Street turns its attention to an upcoming US Federal Reserve meeting where policymakers will attempt to restore market confidence.

Confidence was shaken again in the the past week as investment giant Bear Stearns said it had gained emergency funds from the Federal Reserve Bank of New York and rival bank JPMorgan Chase to shore up its stretched finances.

Market participants said Bear Stearns' woes, triggered by mounting losses from mortgage-backed securities, and ongoing economic worries will likely spur the Fed to cut US interest rates at a policy meeting on Tuesday.

Most economists expect the US central bank to cut its key short-term federal funds interest rate, but opinion is divided over the size of a possible cut. Analysts believe it will be between 50 and 100 basis points, marking a significant reduction in borrowing costs.

The Fed has slashed its fed funds rate by 225 basis points to 3 percent since September in a bid to shore up economic momentum which is being threatened by a multiyear housing slump, a credit crunch, rising jobs cuts and skyrocketing crude oil prices.

Despite such turmoil, the stock markets mostly posted modest gains in the past week.

The leading blue-chip Dow Jones Industrial Average rose 0.48 percent for the week ended on Friday to close at 11,951.09 points, although the index is down 10 percent for the year to date.

The NASDAQ composite finished the week unchanged at 2,212.49, while the broad-market Standard & Poor's 500 index gained 0.4 percent to 1,288.14.

"We are projecting that the FOMC [Federal Open Market Committee] will vote to reduce the federal funds rate by 75 basis points on March 18. There is an outside chance of a deeper 100-basis-point cut, given turbulent conditions in financial markets," economists at Global Insight said in a briefing note.

The yield on the 10-year Treasury bond declined to 3.421 percent from 3.541 percent a week earlier, while that on the 30-year bond fell to 4.348 percent from 4.541 percent.
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