Wednesday, 7 June 2006

Devilish date downs Dow

On the 6th day of the 6th month of the 6th year of the century, the Dow Jones Industrial Average fell below 11,000, if only momentarily. Reuters reports the devilish details:

Stocks fell on Tuesday, taking the Dow below 11,000 for most of the afternoon, as investors grappled with the prospect of more interest-rate increases and slowing economic growth.

Late in the session, stocks trimmed most of their losses and the Dow managed to close just a whisker above the psychologically important 11,000 mark. It hadn't fallen below that level in three months...

The Dow Jones industrial average was down 46.58 points, or 0.42 percent, to end at 11,002.14. The Standard & Poor's 500 Index was down 1.44 points, or 0.11 percent, to finish at 1,263.85. The Nasdaq Composite Index was down 6.84 points, or 0.32 percent, to close at 2,162.78.

Despite the late recovery in the market, there were bad omens.

In Tuesday's session, the major U.S. stock indexes fell below key technicals levels -- a move analysts say portends more downside pressure in the days ahead...

While the Dow fell below the 11,000 level, the S&P 500 slid under its 200-day moving average, a long-term trend line that measures a security's or a stock index's resilience.

One technical analyst said the next key level to watch on the Nasdaq is 2,025, and noted that breaking that level would take the index lower. The Dow's next support base is 10,750, he said.

Comments from Fed officials continued to keep markets uneasy.

William Poole, president of the Federal Reserve Bank of St. Louis, said in a Wall Street Journal interview published on Tuesday that if inflation expectations keep rising, slower growth alone may not be enough to reduce actual inflation.

Fed Governor Susan Bies, talking to a bankers' group, said inflation, excluding food and energy, has been running in the high 2 percent range for three quarters, "which personally makes me very uncomfortable."

Otherwise, the economic data yesterday were not too bad, particularly in Europe. The euro zone services PMI rose marginally to 58.7 in May from 58.3 in April while like-for-like retail sales in the UK grew by 3.6 percent on a year earlier in May -- the strongest since May 2004 -- and total sales rose 6.2 percent.

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