It’s a good bet that Alan Greenspan won’t forget to include a line about inflation in a statement expected Thursday from the Federal Reserve.
At the end of a two-day meeting, the Fed’s interest rate policy committee is expected to boost its short-term interest rate target for the 10th time in the last 12 months.
In announcing the previous increase, on May 3, the Fed mistakenly deleted these words: “Longer-term inflation expectations remain well contained.”
The Fed quickly corrected the error, but the incident raised the ire of investors who fear that Fed’s interest rate increases to pre-empt inflation will overshoot the mark.
The latest survey by Russell Investment Group found that the No. 1 concern among professional money managers was the harm that higher interest rates could do to stock prices.
“I don’t think there is a sense that they’ve already overshot the mark. The concern is that they potentially will go too far,” said Erik Ristuben, Russell’s director of client investment strategies. “They went too far in 1994 and had to come back.”
Noting the persistently low level of long-term interest rates, which reflect benign inflation fears, Ristuben said: “The market thinks the Fed has inflation under control. [Investors] would hope there would be signaling that the Fed believes they have inflation under control.”
Wednesday’s action: The stock market was unable to sustain Tuesday’s rally, despite another drop in crude oil prices and good news on inflation.
Even technology stocks slipped, despite an upbeat quarterly report by business software developer Oracle.
The Dow Jones industrial average fell 31.15 points, to 10,374.48. Among the 30 Dow industrials, Caterpillar and 3M had the biggest price declines.
The Standard & Poor’s 500 index slipped 1.72, to 1199.85. The Nasdaq composite index closed down 1.00, to 2068.89.
Crude oil for August delivery fell 94 cents a barrel, to $57.26, on news of larger-than-expected U.S. inventories of crude oil.
New York Stock Exchange volume reached 1.35 billion shares. Winners outnumbered losers by a 9-7 ratio among NYSE-listed issues. Nasdaq volume totaled 1.61 billion shares, as winners held a narrow lead over losers.
Treasury securities closed lower, despite benign inflation data in the government’s financial report on economic growth in the first quarter.
Analysts blamed a weak auction of $20 billion in two-year Treasury notes. The auction brought a yield to investors of 3.65 percent, up from 3.61 percent last month.
Quiet death: The Securities and Exchange Commission’s decision to end so-called quiet periods in a company’s communication with investors was long overdue.
Officials refusing to talk because they had securities in the registration process with the SEC was an abuse and cop-out in an era of instant communications. In fact, there never was a “quiet period” regulation. Officials were always free to talk, as long as they filed an amendment to pending securities registration materials.
Under the new rule, they must issue a press release when they talk, so all investors can share the pearls of wisdom.
Local news: Shares of Chicago Mercantile Exchange Holdings, Chicago, soared $34.95, or 13 percent, to $305.95, on speculation that it will acquire the Chicago Board of Trade.
– Career Education, Hoffman Estates, a for-profit education services provider, fell $1.24, to $37.27. It said the Education Department is reviewing its financial statements.
– Morgan Stanley boosted its rating of Schaumburg-based Motorola to “overweight” from “equal weight.” Shares rose 18 cents, to $18.53.
– Banc of America Securities trimmed its price target for Chicago-based consumer products maker Sara Lee to $20 from $22. Shares rose 2 cents, to $19.63.
– The Investment Analysts Society of Chicago changed its name to the CFA Society of Chicago. The change reflects the name of a national group it helped create, the Charlottesville, Va.-based Chartered Financial Analyst Institute, said Jill Epstein, chief executive of the Chicago group.
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bbarnhart@tribune.com
