Treasury Secretary Lawrence Summers Tries To Soothe Market Fearsgreenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
Summers Tries To Soothe Market Fears
Treasury Secretary Touts Virtues of Real Economy
N E W Y O R K, April 16 U. S. Treasury Secretary Lawrence Summers reaffirmed his confidence in the nations economic condition today, despite Fridays historic drop in the stock market.
Prospects for the real American economy are good, Summers told Cokie Roberts in a taped interview, aired this morning on ABCNEWS This Week. The real focus should be on whats happening in the real economy.
The treasury secretary emphasized that economic fundamentals continue to look sound, noting that forecasts are predicting continued growth.
However, Summers stopped short of forecasting what would happen on Wall Street on Monday morning, saying he was in no position to make a prediction.
Monday Morning Rally?
Later on This Week, two stock market analysts echoed Summers view, telling ABCNEWS George Will that the markets stunning drop would not continue for long.
Well get a rally tomorrow, said Hugh Johnson, chief investment officer at First Albany. But Joe Battipaglia, chief investment strategist at Gruntal & Co., believes an upturn will only occur after initial heavy selling.
The first hour tomorrow will be the markets worst, Battipaglia said. Johnson agreed, noting that many stocks were not bargains quite yet.
Like Summers, however, the two analysts claim that the underlying strength of the economy will limit the downside of the markets fall.
This is a market event, Battipaglia said, not an economic event.
However, the two analysts expressed concern that the Federal Reserves efforts to curb inflation by raising interest rates could hurt the market over the long term.
End of a Record Boom?
The U.S. economy has been expanding for a record 109 consecutive months, and it is showing few signs of leveling off. Fed policymakers have raised interest rates five times since June, but their efforts have done little to cool the economy.
The economic slowdown theyre seeking could be hitting now, thanks to the stock market.
Prices have plunged on Wall Street in recent weeks losing almost $2 trillion in value last week alone because of growing concerns about inflation and interest rates as well as investors increasing disillusionment with high-technology stocks.
That selling helped lead to record declines in major market indexes Friday. The Nasdaq composite index was down 34 percent from its all-time high reached March 10, and the Dow Jones industrial average is 10 percent below the peak it reached in January.
That has some Americans many of whom have enjoyed greater wealth thanks to the long bull market worrying that the boom times are coming to an end.
Cutting Back on the Extras
Already, some people are saying they will hold off on purchases of expensive goods, such as cars and electronics, and scale back on pricey pampering services, such as facials and massages.
Travel agent Wayne Hawkins, 61, of Texarkana, Texas, put much of his money into stocks and now is bracing for what Monday will bring.
Im greatly concerned, Hawkins said. We were buying a new motor home ... and now were putting it on hold for a few weeks until we see what happens.
Economists will be watching to see if consumers like Hawkins just cut back on the extras or start changing their buying habits. With consumer spending accounting for about two-thirds of the nations economic activity, a sharp curb in spending could lead to a recession.
It isnt likely, however, that stores will empty out anytime soon. The overall economy remains strong, and that should keep people feeling good about their financial well-being, at least for the immediate future.
Unemployment Remains Low
Most importantly, there is a plentiful labor market, and the unemployment rate remains at a 30-year low.
Right now, I dont think that stock market volatility is affecting everyday spending. That is determined a lot more by your paycheck and your job confidence, and the good news is that most people are satisfied with their jobs right now, said Gary Thayer, chief economist at A.G. Edwards & Sons Inc.
Jeff Dukes, who works for Mississippis economic development department, was unfazed by the market downturn as he took some time out from a conference to visit Wall Street on Friday.
From his point of view, only those investors who speculated on risky new Internet companies will be hurt by Wall Streets wild ride.
Were investors, not crap shooters, Dukes said.
An immediate question for the stock market is what plans the Federal Reserve has for interest rates. The central banks policymakers meet next month to decide whether to again push rates higher.
But the economy is bound to slow, whether it is investors or the Fed that reins it in.
No one wants a meltdown, especially the Fed, but theyd like some cooling off, Stephansen said.
ABCNEWS.coms Peter Dizikes and The Associated Press contributed to this report.
-- (firstname.lastname@example.org), April 17, 2000
The fundamentals are sound.......1929 .........2000 ........
History does NOT repeat, but sometimes it rhymes.
-- Chuck, a night driver (email@example.com), April 17, 2000.