Every time (crude prices) move toward $50, it raises serious questions about the economy and earnings in 2005.
If the Fed raises rates three times, they're not doing it just to have fun. Life is good.
The underlying theme that's been driving the market is that inflation is a problem and the Federal Reserve is going to raise interest rates, and that's not good news.
It's a reasonably accepted conclusion that the Fed will raise rates in both June and August; that's what the market has discounted. I don't know if Friday's employment report will change that, no matter what it says.
The combination of a decline in oil prices, however slight, and some fairly upbeat comments (by Fed officials), may have led Fed watchers to conclude the Fed may raise interest rates at its meeting in May, and then stop.
It was almost a sure bet that the Fed was going to raise rates in June. Now it's almost a sure bet, say 50-50 at least, that they won't move in June.
It's very clear that higher energy prices are now being passed along to consumers, and it's not difficult to do that when the economy is as strong as it is. This will put additional pressure on the Federal Reserve to continue to raise short-term interest rates.
The price is down some, but it's clear that oil is at a level that raises serious questions about the U.S. economy and earnings going forward.
I think it's a bygone conclusion that they will raise rates in January, but there's also debate about whether they'll raise rates in March.
The market is worried that the Federal Reserve will continue to raise interest rates well into 2006 and possibly make a policy mistake. If you look at housing starts they're very strong. Everyone knows the unemployment rate is low and the Fed is uncomfortable with that.
It is a down week after some predictable profit taking following a strong January. But the excuse for that profit taking was the Fed. We walked away from last Tuesday's meeting in which they raised interest rates, knowing that they will likely raise rates again at their March meeting.
I don't think it changes anything for Federal Reserve policy. Various early warning signs of inflation are still telling us they have to raise interest rates by 50 basis points and they are likely to do so when they meet next week.