The market suffered yet another blow on Wednesday 11 June, when the Dow at the New York Stock Exchange fell by more than 200 points. Ongoing concerns over rising oil prices, along with fears regarding rising inflation and the possibility of interest rates being raised, as well as almost stagnant economic growth, are seen as the main contributing factors behind the market’s current volatility.
The weekly report from the Energy Department revealed that despite consumers having to foot the bill of $4 for a gallon of gasoline, the U.S. energy demand shows no signs of slacking off. The report by the Federal Reserve, which is published eight times per year – commonly referred to as the Beige Book – was released on Wednesday, and its gloomy content may well have contributed to Wednesday’s bearish market. The Beige Book is compiled from information received from Bank and Branch directors, as well as through interviews with key business contacts, market experts, economists and other sources. The Beige Book indicated that food and energy prices are rising sharply, which is having a profoundly negative impact on retail sales and consumers. The bottom line being that the economy remained generally weak and American’s are taking strain due to rising energy, food costs and inflation – a situation which is echoed in many countries world-wide at present.
With retail sales data being made available on Thursday and consumer inflation data being released on Friday, investors will have more information to work with in trying to gauge the health of the economy. Additionally, investors are no doubt awaiting with intense interest the release of earnings reports from major Wall Street investment banks which are due next week.
In general though, investors and portfolio managers are in agreement that there are very few, if any, positive factors in the market at present. With inflation up, commodity prices higher, the possibility of the Federal Reserve raising interest rates, and an economic deceleration, both in the U.S. and on a world-wide basis, investors and consumers are not having an easy time at present.
