The Marketplace Report: Looking for Market Stability

NOAH ADAMS, host:

And back now with DAY TO DAY. I'm Noah Adams.

Wall Street is kicking off a new week with some good financial news, lower oil prices and a rise in personal income, and that boosted stock prices in early trading today. But "Marketplace" New York bureau chief Bob Moon tells us there's a ghost of sorts hanging over investors on this Halloween, and the fear of the unknown might be holding back the stock market just a bit.

Bob, the Dow industrials and the Nasdaq opened higher today; big gains on the European stock markets earlier. So what problem do you see in this?

BOB MOON reporting:

Well, it's what we don't know as opposed to what we do. We know that the news has been pretty good lately as you mentioned. Today, for example, there was a flurry of takeover deals that investors find so encouraging, word that the pace of consumer spending grew last month, businesss activity in the Midwest was better than expected. So that's what we know. But the policy-makers at the Federal Reserve haven't really given us a clear signal as to how much longer they're going to keep raising interest rates, and that's what we don't know. They meet again tomorrow. Economists who were surveyed by Reuters in the past month were unanimous in expecting another quarter-percentage point increase tomorrow; that would bring it up to an even 4 percent. What's not clear, though, is how serious the threat of inflation is and how far these policy-makers at the Fed might go to keep the prospect of higher prices under control.

ADAMS: And how much worry, indeed, does that create on Wall Street, the idea of higher interest rates?

MOON: Well, it's a little hard to illustrate this point on a day like today when you've got the markets making these big gains. You take a look over at trading in London today, for example; the FTSE 100 scored its biggest one-day point gain in two and a half years. But some analysts say that this is just the kind of thing that really does illustrate the point, this volatility that we've seen in the stock markets over the past few weeks; big gains followed by big losses. They say that that's a sign that investors are still trying to get a sharper, longer-term picture. Last week on Wall Street, we saw a couple of days with triple-digit gains. We also saw a triple-digit loss. And to some, that suggest that investors are still concerned that rising interest rates could constrain economic growth and that could bring lower consumer spending.

ADAMS: And if you're a contrarian on this issue, what would you be looking at?

MOON: Well, so far there hasn't been really much news that might convince the Fed to change course. If anything, the economy's been more resilient than expected. We just saw last week figures from the government that showed that the economic growth had bettered the previous quarter.

Today in the "Marketplace" newsroom, we're looking into the future of the alternative minimum tax.

ADAMS: Bob Moon of public radio's daily business show "Marketplace." "Marketplace" joins us regularly at this time for talks about money and business. It's produced by American Public Media.

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