Shades of Octobers past are spooking investors. Even the Dow's blue chip rally, celebrating the Federal Reserve's pause in its jihad against inflation, died out late in the day. The stock price is so depressed and management so demoralized that speculation is circulating the company might be for sale . However, the Fed said it still believes risks are tipped towards conditions that favor inflation, largely due to the tight labor market and the high cost of oil. The markets took the Fed's comments to mean more interest rate hikes are possible in 2001.
Energy prices are a double whammy for the economy.
Rising energy costs slow the economy by acting as a tax on consumer spending power. Later, the higher energy costs work their way through the economy to end up as higher prices for just about everything. The Federal Reserve has the catch-22 task of dealing with the inflationary effects of energy prices. Higher core inflation normally calls for interest rate boosts from the Fed. Normal volume is 5 million shares.