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Stocks end bad week badly

The Dow loses 46.90 more points Friday to cap its worst week of the year. Analysts blame fears of additional interest rate hikes by the Fed.

By ASSOCIATED PRESS
Published June 10, 2006

NEW YORK - Wall Street finished its worst week of the year with a moderate decline Friday as persistent unease over inflation and interest rates kept investors nervous about buying.

Stocks had appeared to steady themselves in morning trading Friday following several days of heavy losses.

But a jump in import prices and increased demand for foreign-made products renewed the market's inflation jitters and sent stocks sliding by midday.

Since the Federal Reserve said in early May that more rate hikes could be needed to counter inflation, investors have been increasingly unwilling to place bets and bid stocks higher. The Dow Jones industrial average shed more than 355 points this week and is off 6.5 percent from a six-year high of 11,642.98, reached May 10.

Analysts say Wall Street's pullback has been exacerbated by traders repositioning their holdings to account for the risk of rising interest rates and slowing economic growth. But while stocks have slumped, investors were still unsure where to put their money.

"I think we still have to push the risky asset values lower relative to safe assets because there's been so much speculation that needs to be unwound," said Jack Ablin, chief investment officer of Harris Private Bank, who added that the afternoon retreat was an ominous sign of more losses in the coming sessions.

The Dow slid 46.90, or 0.43 percent, to 10,891.92, after having been up 37 points earlier in the session.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 5.63, or 0.45 percent, to 1,252.30, while the Nasdaq composite index lost 10.26, or 0.48 percent, to 2,135.06.

The major indexes finished a nervous week with steep losses, saddled by concerns that rising interest rates would slow demand and hinder the global economy. For the week, the Dow dropped 3.16 percent, the S&P 500 sank 2.79 percent and the Nasdaq plunged 3.8 percent.

While the Fed has been fixated on accelerating inflation, recent signs of economic weakness has investors fretting that the central bank might lift rates too high and derail the economy, said Jack Caffrey, equities strategist for JPMorgan Private Bank.

Next week's reports on wholesale and consumer prices will provide the latest clues on the economy's health and could spark more investor debate on the battle between economic growth and inflation.

"People will be thinking about what the Fed will be debating at their June 28-29 meeting," Caffrey said.

"Investors are scared not necessarily about what the Fed will say, but of the possibility that the Fed may overtighten rates."

[Last modified June 10, 2006, 07:42:37]