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June
17, 2000
Guess Again
Almost every economic indicator released last week pointed toward a cooling
economy. The exception was industrial production, up 0.4%, versus an
expected drop of 0.3%. That nasty number led one Fed governor to all but
say that the Fed will raise rates again. However, by the end of the week,
the head of the New York Fed hinted the opposite. Two talking heads is
much more entertaining than Greenspan talking out of both sides of his
mouth.
The stock market is treading water. If the economy slows, the Fed will
stop raising rates, and the stock market will be happy. But if the market
starts heading for the moon, the Fed might raise rates to keep a lid on it.
Luckily, we have something else to focus on right now. Second quarter
earnings "confessions" or lack thereof will be trickling out. These early
warnings of earnings disappointments used to be called preannouncements,
and are a good indicator of the overall health of corporate earnings.
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