Stocks will go through another day of the interest rate hike blues. Asia and Europe fell. The Dow is set to open slightly lower.
Inflation concerns put the fear of Greenspan into many on Wall Street on Friday. The principal culprit: the Consumer Price Index data for April coming in far above expectations. Don't expect much action in the markets today, with the Federal Reserve Board meeting tomorrow. The sentiment is that the central bank will take back the quarter-point cut that Alan Greenspan & Co. handed out last summer.
What happened to the economy in April -- has the bull market stumbled? The culprit was oil: prices went up. Gasoline prices rose more than 6 percent. When fuel is more expensive, products cost more to make and shipping them also becomes more expensive. The period of cheap oil was a short-term result of an industry that slipped for a bit and let supply outstrip demand. That's been corrected.
While it's true that manufacturers have little pricing power, they will need to hike prices to get over this hump. And that's inflation, my friends. And that's why the Fed is likely to raise rates when it meets tomorrow from the present 4.75 percent rate.
Watch Amazon.com, Global Crossing, Healtheon, Hewlett-Packard, K-Tel International, Plantronics and Zapata to be among Monday's stocks to watch.
On Friday, a blood bath in the bond market sent investors scurrying Friday as the Dow plunged 194 points to close at 10,913.32 and the Nasdaq dropped 54 points to 2,527.87.
The Inter@ctive Week @Net Index dropped 7 to 319 on Friday.
At the Bell
The Dow Jones industrial average is set to open slightly lower. The Standard & Poor's 500 index for June futures contracts dropped 4.5 points to 1,334.8 at 7:25 a.m. EST in 24-hour electronic trading, are indicating a 36-point decline in the global bellwether.
Asia sank on concern that U.S. interest rate may increase. The Nikkei 225 in Tokyo dropped 2.32 percent to 16,421, the Seoul composite in South Korea declined 2.71 percent to 717, Singapore's Strait Times index dipped 0.15 percent to 1,880 and Hong Kong's Hang Seng fell 2.08 percent to 12,588.
A rise in U.S. rates could weaken demand for Asian imports as well as boosting borrowing costs for Asian companies. If the Fed does hike up interest rates, it tightens the money supply and there's money flowing around to buy a Sony discman.
Also, the U.S. rate is the benchmark that all other interest rates are measured, so if they go up in the U.S., they go up around the world. Many nations even have their currencies pegged to the value of the dollar.
European markets also suffered on U.S. rate hike concerns. London's FTSE 100 fell 1.32 percent to 6,217, the CAC 40 in Paris lost 1.08 percent to 4,277 and the Xetra DAX in Frankfurt dropped 1.33 percent to 5,114 at 7:34 a.m. EST.