Investors spent the week consumed with anticipation about whether or not the Federal Reserve will increase the fed funds rate. Their sigh of relief Friday, when the Labor Department reported a weaker-than-expected payrolls report, quickly turned into a sigh of despair.
In a classic "buy the rumor, sell the news" phenomenon, the pre-jobs, pre-Fed rally faded as investors realized that a Fed pause does not guarantee a soft landing in the economy, nor does it necessarily mean an end to more rate hikes. The one thing a Fed pause does mean is that the economy is slowing, and that puts pressure on earnings growth.
"The 'Fed is done' fire behind buying stocks has run its course," says Peter Boockvar, chief market strategist at Miller Tabak. "Now it's about, 'look what we're left with.'"
On Friday, investors were left with a sinking feeling after early euphoria quickly evaporated. After rising more than 100 points earlier in the day, the Dow Jones Industrial Average fell 0.02% to 11,240.35. The S&P 500 dropped 0.1% to 1279.43, and the Nasdaq Composite slipped 0.35% to 2085.05. For the week, the Dow finished up 0.2%, the S&P rose 1 point to 1279.43, while the Nasdaq fell 0.4%.
By Liz Rappaport
Markets Columnist
8/4/2006 5:25 PM EDT
Markets Columnist
8/4/2006 5:25 PM EDT
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